The micro finance industry, catering to the financially underserved, has witnessed exponential growth, with a global outreach to over 140 million clients. By providing small loans and financial services, it empowers entrepreneurs, particularly women, and contributes significantly to poverty alleviation, reaching a market worth exceeding $100 billion globally.
With a market capitalization of Rs 22,073.71 crore, the shares of CreditAccess Grameen Ltd were trading at Rs 1,385.00 per share, increasing around 0.20 percent as compared to the previous closing price of Rs 1,415.15 apiece.
Looking into CreditAccess Grameen Ltd’s performance, revenue increased by 31 percent from Rs 1,065 crore in Q4FY23 to Rs 1,457 crore in Q4FY24. During the same time frame, net profit increased by 34 percent from Rs 297 crore to Rs 397 crore.
ICICI Direct, one of the well-known brokerages in India, gave a ‘Buy’ call on the fintech stock with a target price of Rs 1,800 apiece, indicating a potential upside of 30 percent from Monday’s price of Rs 1,385.00 per share.
Here is the rationale behind the bullish potential upside of 30%:-
● Financial Growth: CreditAccess Grameen demonstrated robust financial performance in Q4FY24, with a notable 27% year-on-year increase in Assets Under Management (AUM) to ₹26,714 crore. This growth was primarily driven by a healthy disbursement growth of 12.3% year-on-year, coupled with a 15.3% year-on-year increase in borrower accretion.
● Profitability and Asset Quality: Despite steady margins at 13.1%, the company achieved a significant 33.9% year-on-year growth in Profit After Tax (PAT) to ₹397.1 crore. However, there was a marginal increase in Gross Non-Performing Assets (GNPA) to 1.2%, attributed to a cautious stance in credit provisioning amidst the company’s geographic expansion.
● According to ICICI, the business retains its leadership in existing markets, and further development into new areas is expected to increase client accretion. Management intends to expand AUM by 23-24%, with core market growth of 10-15%, showing a focus on new markets.
● Challenges and projection: The firm confronts challenges associated with regional expansion, as evidenced by a rise in credit cost projection from 1.6-1.8% to 2.2-2.4%. This adjustment is due to the anticipation of a lower client vintage in new markets.
Despite this, management has set a broad forecast range of 5.4-5.5% for FY25E, indicating confidence in their ability to overcome hurdles while maintaining growth.
CreditAccess Grameen Limited is registered with the RBI as a non-deposit-taking NBFC – Microfinance Institution. It provides microfinance services to women who are members and structured into Joint Liability Groups. It also leverages its distribution channel to provide many additional financial goods and services to its members.
Written by:- Abhishek Singh
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