ICICI Securities research report on CreditAccess Grameen
E CreditAccess Grameen’s (CAGL) Q4FY20 result is characterised by two key events: a) completion of first phase of Madura acquisition (~76%) and b) proactive building of Covid-19-related contingency provision of ~Rs0.8bn (87bps of loans). Key highlights of the quarter: 1) strong 38%/17% YoY growth in AuM/borrowers; 2) ~40bps decline in cost of borrowing to 9.6% (marginal cost of borrowing is lower by ~50bps at 9.1%) even in a most challenging quarter; 3) GNPA increase to 1.57% (0.85% in Q3FY20); and 4) ~70% YoY decline in standalone PAT to Rs228mn due to merger-related expenses (Rs150mn) and elevated credit cost due to Covid-19. Though the merger brings in synergy, decline in consolidated CAR to 23.6% (post acquisition) and Madura’s high concentration in Tamil Nadu (most districts in red zone) poses near-term risk.
Outlook
However, strong execution track record, weekly collection model, customer profile (~35-40% unique and ~75% >1 year) and ability to raise funds at competitive rates, would ensure CAGL navigating the current challenging phase relatively better than peers and emerging stronger in post Covid-19 era. Maintain BUY with a target price of Rs585.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!