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Stock To Buy: Brokerage Given 'Buy' Tag To This Small-Cap NBFC Stock For 29% Potential Upside


ICICI Securities, a leading brokerage firm, in its recently published report on CreditAccess Grameen Ltd., has given a 'buy' rating for a target price of Rs 1,300 per share. CA Grameen's FY22 annual report provides detailed insights on how the company has 'Stood the Test of Time and Trust' Despite repetitive covid waves, the it delivered >2% RoA and >9% RoE. Superior management execution also reflects in it completing the integration process of Madura Micro Finance Limited (MMFL) in September 2021 and by March'22, ~65% of MMFL's AUM was serviced as per CA Grameen's operating model. Its 99% cashless disbursements, digital sourcing of 0.6mn new customers, TAT 6,000 branch audits under new automated digital application are key highlights of its digital transformational journey during FY22.


Stock Outlook

Stock Outlook

The stock's Current Market Price (CMP) is Rs 1,010.60 per share, it was opened at Rs 1,057.50 on NSE. Its share price declined 4.16%. The 52-week low of the stock is Rs 494.70 per share, while the 52-week high is Rs 1,154 per share. Early last June, this year, it touched the 52-week high. Investors buy the share of the company at the CMP, they could see potential gains of 29% in 12 months, considering the estimated target price of Rs 1,300 per share.

The stock has performed well in long term, 3 years of investment. In 3 years it has given positive returns of 95.91%, and in 1 year it has given 39.98%, respectively. Over the last 3 months, it has given positive returns of 10.93%, however, in the past 1 month, it has given negative returns of 6.52%.

CMPTarget PricePotential Gains
Rs 1,010.60Rs 1,30029.00%
Cross-cycle RoA of >3% is an outcome of its customer and employee-centric operating model

Cross-cycle RoA of >3% is an outcome of its customer and employee-centric operating model

CreditAccess Grameen's business resiliency and agility reflects in it generating cross-cycle 3% RoA, despite encountering multiple challenges both on the business and economic front in the form of demonetisation, IL&FS default led credit/liquidity crisis, covid pandemic for two financial years, and regular incidences such as floods, cyclones, and third party interventions.

Geographical diversification to remain the key strategic goal

Geographical diversification to remain the key strategic goal

CreditAccess Grameen has always believed in contiguous expansion rather than building pan-India network in the short term. In line with its diversification strategy, it has identified new growth states like Gujarat, UP, MP and Bihar and >70% new districts were added in these 4 states during FY22. More than 47% of the new borrower addition during FY22 came from outside of the top 3 states. To maintain its leadership position in KTK (24%) and scale business in the newly entered states, it opened 211 branches and added >1,000 employees in FY22, mainly outside the top-3 states.

Plan to scale up secured portfolio and diversify revenue stream by improving cross-sell of non-lending products

Plan to scale up secured portfolio and diversify revenue stream by improving cross-sell of non-lending products

By entering new phase of organisational journey and much larger balance sheet, CreditAccess Grameen has rightly articulated its strategy to strengthen balance sheet by shifting loan mix in favour of secured products which currently contribute <1% to total AUM. Further, it now plans to shift focus from only borrower to the entire household of borrower to cross-sell / up-sell and most importantly diversify revenue stream by improving non-lending revenue. While it aims to diversify product portfolio and scale secured portfolio, it highlighted core MFI lending would continue to remain the centre of all strategy. Incremental focus would be on improving product per customer, which currently stands at 1.6x (standalone), and is predominantly driven by non-lending products.

Market Share & Customers

Market Share & Customers

State-wise market share

CreditAccess Grameen commands 5.8% market share in overall microfinance space and 16.5% in NBFC-MFI space. State-wise it remained the most dominant player in Karnataka with 24% market share, followed by Maharashtra at 16%, Tamil Nadu at 9% and MP at 7%.

Customer vintage

Customer-centric business model and effective human capital management (stable team with attrition rate of <25%) helped CA Grameen maintain steady >80% customer retention ratio. As on March'22, only 15% of borrower base is in

Valuation, Outlook & Key Risk

Valuation, Outlook & Key Risk

CreditAccess Grameen articulated its vision of becoming the preferred financial partner of 10mn low-income households by 2025 and initiated measures to leapfrog this journey. Revised MFI regulation in the form of risk-based pricing, upward revision of household income and an increase in the limit of non-MFI loans to 25% (currently only 1%) would complement its vision.

It has identified products under retail category - small ticket business loans, affordable housing loans, gold loans and 2-wheeler loans. It has already made the necessary technology investments to kick-start its retail journey and plans to run extensive pilots over the next few quarters before scaling up these products.

Maintain BUY with revised Target Price of Rs1,300 (earlier Rs 1,200) as we roll over BVPS to Sep-23 and value at 4x P/BV.

According to the brokerage, the key risks are A) stress unfolding higher than anticipation and B) moderation in AUM growth trajectory.

CreditAccess Grameen Ltd

CreditAccess Grameen Limited is India's largest microfinance institution, headquartered in Bengaluru, Karnataka. It is publicly listed on the NSE and BSE, and recognized by the Reserve Bank of India (RBI). The company is engaged in providing microfinance services to women who are enrolled as members and organized as Joint Liability Groups. It also uses its distribution channel to provide certain other financial products and services to the members. The company is popularly known as "Grameen Koota" amongst its customers, translating to "rural group" in Kannada.


The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. advises users to check with certified experts before taking any investment decision.

Story first published: Tuesday, July 5, 2022, 21:44 [IST]
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