Dalal & Brocha

CreditAccess Grameen (Hold)

Target: ₹650

CMP: ₹703.10

Credit Access Grameen Ltd has reported a good set of numbers in a challenging environment for the quarter ended September 30, 2020 and was in line with our estimates.

While the company's profitability has been impacted by higher Covid-related provision, it registered a strong GLP (41 per cent y-o-y to ₹11,180 crore) growth.

Total ECL provisions, including additional Covid provisions, (₹246 crore) were ₹561 crore (5.17 per cent of loan portfolio). Collection efficiencies have improved and stands at 89 per cent as on October, 2020 for Credit Access and 85 per cent for Madura Microfinance.

Stock price has rallied significantly post our initiation at ₹408 and has achieved our target price. We now change our stance from ‘Buy’ to ‘Hold’, maintain our target price and wait for collection efficiency to reach pre-Covid levels.

Moratorium levels of Credit Access at 12 per cent of loan book as on September 30, 2020, and 11 per cent of loan book as on October 31, 2020 compared to 26 per cent in June.

Moratorium levels of Madura Microfinance at 17 per cent of loan book as on September 30, 2020, and 15 per cent of loan book as on October 31, 2020, compared to 46 per cent in June.

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