This MFI lender's stock soars 7% even as Q1 profit plunges; Here's why

Business Standard

23-07-2025

Shares of CreditAccess Grameen rose over 7 per cent on Wednesday even after the company reported an 85 per cent year-on-year (Y-o-Y) to ₹60.2 crore for the quarter ended June 2025 (Q1FY26).
The micro finance lender's stock rose as much as 7.05 per cent during the day to ₹1,370 per share. The stock pared gains to trade 5.3 per cent higher at ₹1,347 apiece, compared to a 0.43 per cent advance in Nifty 50 as of 1:10 PM.
Shares of the company have been range-bound since July, and at day's high, the stock was at the highest level since July 2, 2024. The counter has risen 52 per cent this year, compared to a 6.2 per cent advance in the benchmark Nifty 50. CreditAccess Grameen has a total market capitalisation of ₹21,496.25 crore, according to BSE data.
CreditAccess Grameen Q1 results
The microfinance lender's net profit declined 85 per cent Y-o-Y primarily to ₹60.2 crore contraction in net interest income and higher provisioning. Sequentially, the net profit rose 27.5 per cent from Rs 47.2 crore in the quarter ended March 2025 (Q4FY25).
The lender's net interest income (NII) declined 1.6 per cent to ₹937 crore. Sequentially, NII grew 7 per cent from ₹876.1 crore in Q4FY25. Its net interest margin (NIM) dropped to 12.8 per cent in Q1FY26 from 13.0 per cent in Q1FY25. However, it improved from 12.7 per cent in Q4FY25.
The company's gross non-performing assets (NPAs) rose sharply to 4.70 per cent as of June 2025, up from 1.46 per cent a year ago. It, however, declined from 4.76 per cent at the end of March 2025.
Analysts bullish on CreditAccess Grameen
While the microfinance industry (MFI) is still navigating stress, JM Financial believes CreditAccess Grameen is best positioned to recover early. This is due to its strong stress recognition framework, along with an accelerated write-off policy and high expected credit loss coverage.
Management expects elevated credit costs to persist in Q2FY25, before moderating to 3-3.5 per cent in the second half of FY25. FY26 guidance for loan growth and return on equity (RoE) has been maintained at 14-18 per cent and 11.8-13.3 per cent, respectively, with stronger momentum expected in the second half, particularly from the retail finance book.
JM Financial expects around 15 per cent assets under management CAGR over FY25-27. Given the improving outlook, the brokerage has upgraded the stock to 'Buy' and revised the target price to ₹1,475.
Analysts at Motilal Oswal said that the lender has successfully navigated a period of industry-wide challenges, demonstrating remarkable resilience and a return to normal operational efficiency. The company will continue to prioritise balance sheet normalisation through accelerated write-offs and prudent provisioning, it said.