CreditAccess Grameen: Q2 profit beats estimates, but Nomura flags asset quality risks

The brokerage noted that credit costs were elevated as the lender created 45 basis points of macroeconomic buffers. Excluding these buffers, credit costs stood at a healthy 2.1% on an annualised basis. Gross loan growth was 19% year-on-year, largely driven by the retail finance segment, which grew 2.5 times year-on-year and is scaling up in line with management's guidance. Drought raises concerns over asset quality

Nomura flagged drought conditions in CreditAccess Grameen's second-largest state as a bigger concern than seasonal floods, which management said had caused only a few weeks of disruption in select states. The brokerage said drought-related stress could show up in asset quality over the next few quarters. Management has tightened underwriting and strengthened collection efforts in drought-hit locations.

Credit costs stood at 3.38% on an annualised basis in the first half of FY27. Nomura expects elevated credit costs in the second half and has built in credit costs of 3.8% for FY27 and FY28. Lending rates cut by 50 basis points CreditAccess Grameen cut lending rates by 50 basis points across products from October 2026, following favourable credit cost trends. Management could reduce lending rates further in the next quarter if cost of funds and credit cost trends remain favourable, according to Nomura.

The brokerage said management had raised its net interest margin guidance by 1.5-1.6 percentage points. Following the revision, Nomura raised its FY27 net profit estimate by 14%, while marginally trimming its FY28-29 estimates by 2-3% amid continued caution on asset quality. Promoter changes and insurance reforms remain overhangs Management has indicated that CreditAccess Grameen's promoter is looking for a strategic exit, with any changes expected at the promoter level, Nomura said.

Insurance reforms are another overhang for the stock. However, the brokerage said its greater concern was the drought, which remains geographically limited for now. Nomura cuts target price to Rs 1,700 Nomura lowered its target price to Rs 1,700 from Rs 1,830, implying a valuation of 2.1 times September 2028 forecast price-to-book value. The brokerage noted that CreditAccess Grameen traded at one-year forward price-to-book multiples of 1.8-1.9 times during its previous bad cycle, compared with the current multiple of 1.6 times.

"We are cautious and thus lower our TP to INR1,700 (from INR1,830) implying 2.1x Sep28F P/B. But we still see healthy upside and reaffirm our Buy rating," Nomura said.