CreditAccess Grameen reports strong AUM growth in Q3: Highlights from earnings call

No 4 | Company name: CreditAccess Grameen Ltd. | Market Cap: RS 11,384 crore | Growth in 2019: 110% (Image: creditaccessgrameen.com)

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CreditAccess Grameen has registered a 8.5 percent year-on-year growth in Q3FY20 profit at Rs 108.2 crore and 28.1 percent rise in net interest income at Rs 301 crore.

Operating profit during the quarter grew 22.4 percent YoY to Rs 200.8 crore.

Loan growth was strong at 45.8 percent YoY and disbursals were at three-quarter high, growing 69 percent YoY to Rs 2,977 crore for the quarter ended December 2019.

However, asset quality deteriorated further with gross non-performing assets rising to 0.85 percent in Q3FY20, from 0.52 percent in previous quarter.

Here are key highlights by Narnolia Financial Advisors from CreditAccess Grameen's earnings call :

According to the management, CreditAccess Grameen raised Rs 2,183 crore at a weighted average rate of 9.3 percent with Rs 398 crore through the direct assignment which is expected to remain at a 10 percent level of the portfolio, this quarter direct assignment interest rate stood at 8 percent. The term loan raised from SBI is at 10 percent.

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The IRR has come down because of the revision of the interest rate of the portfolio. The impact of floods in North Karnataka & South Maharashtra has led to higher provisioning of Rs 54 crore.

There is some external interference in two districts in coastal Karnataka that has led to stress in the month of August along with the Karnataka loan waiver scheme, which led to the stress of Rs 120 crore. Now 75-80 percent of the customers have regularized their accounts.

The effect is ring-fenced in these two districts with 1 percent exposure in each of the districts with collection at 70 percent. The overall on-time repayment collection efficiency is at 98.3 percent. Management does not expect a further impact on this portfolio.

Maharashtra flood (Kohlapur, Belgaum & Sangli) in August 2019 has impacted Rs 80 crore of portfolio. The situation has improved with only Rs 20 crore is in 60 + DPD while 80 percent of the exposure is already collected. Management has guided to lower the operating expense in FY21. To have sufficient exposure in newer states management has opened almost 40 additional branches of FY21 target.

Credit cost will remain moderate in Q4 FY20 while it will lead the company to meet PAT guidance. Overall credit cost should not increase by 1.25 percent level, the management said.

Principal at risk 30 is Rs 90 crore, PAR 60 is Rs 35 crore while PAR 90 is Rs 21 crore. Stage 2 (16-60 DPD) is at Rs 90 crore. In the next 3-year period, the share of Karnataka will come down to less than 30 percent while Maharashtra will be around 20 percent. Growth will be maintained through contiguous district expansion, it said.

Only four districts have more than 3 percent portfolio exposure, Management is continuous to decrease the exposure to 2 percent of the portfolio. The acquisition of Madura Micro Finance is expected to be completed in this financial year. The merger is expected to increase customer acquisition as these companies have only a 5% overlap in customers, it added.