CreditAccess Grameen conducted a conference call on 19 July 2024 to discuss the financial results for the quarter ended June 2024. Udaya Kumar Hebbar, MD of the company addressed the call:

Highlights:

The company has continued to maintain consistent performance in return ratios delivering RoA above 5% and RoE above 20% for the sixth consecutive quarter.

The company continues to be the lowest-cost lender to customers with yield at 21%.

The company has strengthened underwriting standards by aligning the ECL provisioning policy based on district-specific risk and customer vintage, improving from earlier state-specific criteria. The company is moving to a district-based pricing regime benefiting customers.

The business momentum was impacted due to severe heat wave across several regions and operational limitation during general elections. The first quarter of the financial year is seasonally moderate quarter for the microfinance sector.

However, the company has exhibited strong growth in the retail finance loan book at 261% end June 2024 over June 2023.

The company has added 1.9 lakh customers in Q1FY2025, while the customer base increased 13% to 49.84 lakh end June 2024.

The asset quality of the company was hit by transitory increase in delinquencies due to below normal rainfall in the previous season.

The rise in NPA ratio was also led by 1.5% qoq decline in gross loan book. However, the collection efficiency was healthy at 97.8%.

The company does not see any downside risk to its growth and profitability guidance for FY2025. The company is confident of achieving annual performance guidance for FY25.

The cost of borrowing was steady at 9.8% and the company expects the cost of borrowing to be at 9.8-9.9% for FY2025 supported by strong mix of domestic and foreign borrowings.

Spread stood at 11.2% and the NIM was at 13% with strong balance sheet.

The company expects delinquency level to normalize in the coming quarters and expect credit cost to be within the guided range at 2.2-2.4% for FY20024-25.

The credit cost was elevated at 2.7% and the net credit cost was at 2.6% for Q1FY2025.

The company has taken adequate measures to mitigate delinquency flow-rates with tightening filters while onboarding new customers / extending new loans to existing customers, deploying senior field staff & business support teams to control portfolio at risk trend.

The credit cost outside the core market stands at 3.5% which is expected to normalize in the coming quarters.

The company aims to raise the individual loan book size to 15% of the overall loan book by March 2028.

The company is maintaining the growth guidance at 23-24% for FY2025. About 60-65% of the microfinance business is generated in H2 of the financial year. the company expects normal rainfall to support growth.

The company does not expect any significant challenges due to new MFIN guidelines with focus on customer acquisition. The company is actively monitoring customer leverage trends and taking corrective actions.