CreditAccess Grameen Ltd (CREDITACC) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (Motilal Oswal Financial Services Limited): Ladies and gentlemen, good day, and welcome to the CreditAccess Grameen Limited Q2
Moderator (Motilal Oswal Financial Services Limited): FY '27 earnings conference call hosted by Motilal Oswal Financial Services Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Abhijit Tibrewal from Motilal Oswal Financial Services. Thank you, and over to you, sir.
Abhijit Tibrewal (Motilal Oswal Financial Services Limited): Thank you, Darwin. Good evening, everyone. I am Abhijit Tibrewal from Motilal Oswal and it is our pleasure to welcome you all to this earnings call. Thank you very much for joining us for the CreditAccess Grameen call to discuss their Q2 FY '27 earnings. To discuss the company's earnings, I am pleased to welcome Mr. Ganesh Narayanan - Managing Director and Chief Executive Officer, Mr. Gururaj Rao - Chief Operating Officer, Mr. Nilesh Dalvi - Chief Financial Officer, and Mr. Sahib Sharma - DGM, Investor Relations and Strategy. On behalf of Motilal Oswal, we thank the senior management and the Investor Relations team of CreditAccess Grameen for giving us this opportunity to host you today. I now invite Mr. Narayanan for his opening remarks post which, we will open the floor for a Q&A. With that, over to you, sir.
Ganesh Narayanan (CreditAccess Grameen Ltd): Thank you, Abhijit. A very good evening, everyone, and a very warm welcome to discuss our second quarter and first half of FY '27 business performance. We reported our highest quarterly profit of 502 crore in this quarter, having grown 5-fold over the past five years. Current financial year marks a clear turn around, recording 995 crore PAT in the first half, as against 778 crore PAT during the previous financial year. Our H1 ROA stood at 5.9 and ROE stood at 23.8. We're delivering record profitability while remaining amongst the most competitively priced lenders across our product segment. Our lending franchise today spans across group loans, individual business loans, secured business loans, affordable housing loans, and two-wheeler finance, with growth, margins and asset quality, all moving in the right direction. Our AUM grew 19.5% year-on-year and 2.1% quarter-on-quarter to 30,946 crore. Disbursements stood at 6,355 crore, up 19.4% year-on-year and 4.1% quarter-on-quarter, taking H1 disbursements to 12,461 crore. We added 2.3 lakh new borrowers, of which 35% were new to credit, taking our H1 additions to 4.9 lakh customers. We also opened 62 60 new branches during the quarter, expanding our network to 2,326 branches across 460 districts. Digital collections rose to 26.3% versus 18.1% a year ago. When we began building our retail franchise, our thesis was very simple: that customers we served for years would need more than a group loan as their economic profile improves and financing needs expand. That thesis continues to be playing out at scale with regulatory support in place. Of the 45 lakh borrower base, 15% or 6.8 lakh borrowers belong to retail finance. Retail finance AUM grew to 7,200 crores, now 23.3% of the total AUM, up from 20.6% in Q1 FY '27. Within this, our secured book comprising of secured business loans, affordable housing loans, and two-wheeler loans grew 60.9% year-on-year to 695 crore. Our mortgage presence now spans across 300 GL and 128 retail finance branches with two-wheeler loans offered through 950 plus GL branches. Our two-wheeler loan book witnessed strong traction having crossed 60 crore compared to 20 crore in Q1. Further, our ability to meet evolving credit needs of our customers is also deepening their loyalty with borrower retention rates improving from 85% in FY '26 to 88% in H1 FY '27. Alongside, we're also strengthening our collection ability with the dedicated collection team comprising of 500 plus employees across operating geography.
Ganesh Narayanan (CreditAccess Grameen Ltd): portfolio stood at INR23,746 crore as of September 2026, a marginal decline of 2% from the start of FY '27. This was on account of write-offs and graduations. Most of the INR614 crore portfolio written off in H1 FY '27 consists of group loans. With write-offs normalizing and the seasonally stronger second half ahead, and increase in customer acquisition during H2, we expect the group loan book growth to return to guided levels. Commenting on our asset quality, we saw a temporary increase in monthly PAR accretion rates during August and September, driven by excess rainfall and flooding in certain regions of Bihar, UP, Chhattisgarh, and Madhya Pradesh, along with seasonal festivities in a few geographies. However, despite this, our asset quality is back to pre-crisis levels, at its best in the last 10 quarters. Gross NPA stood at 1.79%, net NPA at 0.59%, and PAR 90+ at 1.11%, each improving sequentially. Collection efficiency, excluding arrears, stood at 97.9% and ex-bucket collection efficiency for September stood at 99.71%. Credit cost for the quarter stood at INR299 crore or 0.99% on a non-annualized basis, of which .70 or 70 basis points was driven by new PAR and 29 basis points due to increase in ECL provisioning rates. We further strengthened our ECL provisioning at 3.31% after building a macro-prudential buffer of 45 basis points or INR137 crore. Our annualized H1 FY '27 credit cost of 3.43% includes normative credit cost of 2.98% and .45% of macro-prudential buffer, which is well within our guided range. Commenting on our margins, we saw our NIMs expand to 15.1% in Q2 from 14.4% in Q1, driven by lower interest reversals in group loan books, higher-yielding individual loan book, stable cost of borrowing, and higher capital position. Our cost-to-income ratio improved to 28.2%, and PPOP grew 39.6% year-on-year and 11.2% quarter-on-quarter to INR970 crore in Q2 FY '27. Our marginal cost of borrowing stood at 9.1% in Q2 FY '27, while average cost of borrowing was stable at 9.1%. Our capital position strengthened further, with our capital adequacy at 26.9%, Tier 1 at 26.2, and total equity base of INR8,919 crore. On the liability side, diversifying our funding mix, coupled with focus on long tenor funds, remains our medium-term strategy. We signed USD175 million ECB loan in October, syndicated by Standard Chartered Bank and DBS Bank. Despite global macroeconomic uncertainty and strong competition in the ECB market from FCNRB deposit mobilization by banks, the transaction received a strong response at a competitive pricing, with 10 financial institutions participating from across Asia, Middle East, and Africa. We see this as a clear reflection of internet international lenders' continued confidence in our business model and governance standards. This is our fifth ECB syndication in the past 5 years. We also mobilized INR940 crore of domestic NCDs through private placement process in this financial year. ECBs and NCDs help us both in liability diversification as well as securing longer tenor of funding to strengthen our ALM. Basis of strong H1 FY '27 financial performance, we raised our profitability guidance for FY '27: RoA of 5.2% to 5.8% versus 4% to 4.8% earlier, and RoE of 21% to 24% versus 16% to 20% earlier. We retain our AUM growth guidance of 20% to 25%, supported by return to growth in group loan portfolio coupled with continued momentum in retail finance. We expect a NIM of 14.4% to 14.7% as against 12.8% to 13.2% guided earlier, driven by healthy asset quality, strong control over borrowing costs, and a higher capital position, even after factoring the 50 bps rate rate reduction applicable from October onwards. We are best placed to protect our NIMs in an evolving macro- macroeconomic environment.
Ganesh Narayanan (CreditAccess Grameen Ltd): our NIMs are currently at the highest levels. Further, we can maintain our borrowing cost range range bound supported by diversified lender base, high quality PSL book and judicious borrowing mix between Repo, MCLR, and fixed every. Cost cost-to-income may range between 29% to 30% as operating costs remain well under control despite inflationary trend. We retain our credit cost guidance of 3% to 4%, and it should comfortably cover for any volatilities on account of evolving drought-related conditions in some operating geographies. We are seeing a few signs of drought-related challenges in October around certain pockets of Maharashtra wherein the borrowers are requesting for additional time for repayment, including restructuring options. At this point of time, we're not seeing any on-ground impact in any other geographies. We also note that Northeast monsoons are expected to be normal providing respite to Southern peninsular India. We'll focus on addressing the growing credit needs of our established seasoned customers with a proven track record and record of repayment across credit cycle through renewals, group loan servicing, and targeted graduation to individual secured lending products. New customer acquisition will be a key growth driver with momentum expected to accelerate in the H2. To conclude, CA Grameen today is stronger, more diversified, and more profitable than any point in its history, and we are executing with the discipline of a franchise that has been tested through cycles. As we enter the seasonally stronger second half, we do so with momentum in our business, strength in our balance sheet, and full confidence in delivering the guidance we've set out today. We will now open the forum for questions. Thank you.
Moderator (Motilal Oswal Financial Services Limited): Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Renish with ICICI. Please go ahead.
Renish (ICICI): Yeah. Hi, sir. Congrats on a good set of numbers. So just two things. So, one on this 50 basis point lending rate cut. So, when I look at the marginal cost of borrowing, which has already gone up by almost you know, 25-30 basis point sequentially, so when there is a clear sign of likely increase in cost of borrowing going ahead, what is the thought process behind trimming lending rate now? I mean, I can understand the better profitability must be driving this, but when we see a broad kind of a scenario spanning out you know, cost of borrowing likely to go up, just wanted to understand why to consider lending rate cut at this stage? Not waiting for, maybe, one more quarter.
Ganesh Narayanan (CreditAccess Grameen Ltd): Right. Renish, our our current NIMs are at highest levels, and as you know, the lending rate is guided by our pricing policy which takes into account several factors including your credit cost, including your cost of borrowing as well as OpEx, right? Only Lever today is if credit cost increase, that is when we can retain this pricing. Now, the credit cost since we are publishing within the guided range and being driven by the pricing policy, this will be range bound. So, we have we have earlier also indicated we will do a 50 basis point cut this quarter, and probably, 50 in the next quarter. Marginal cost of borrowing increase is likely because of the mix of borrowing that we take right now and not necessarily indicating a higher increase at this point of time, right? So, we do acknowledge that the repo rate has gone up, but it will be gradually passed, and that will go through. So, if, for example, if the cost of borrowing goes up in next quarter, we have the right to reprice or not necessarily pass back the 50 bps that is planned for the next quarter also. So, I think it is something that we can work on, but at this point of time, we need to pass this 50 basis points to the customer given that the credit cost is held as ground.
Renish (ICICI): Got it. Got it.
Nilesh Dalvi (CreditAccess Grameen Ltd): Yeah. Renish, Nilesh here, so I'll add a couple of points here. So, firstly, on the borrowing cost, we do have borrowings from a wide range of lenders. So, there are more than 80 lender lending institutions from whom we borrow, and obviously, the borrowing rates will be within a range. That's why the blended rate what we appear what appears on our balance sheet is around 9%. So, in second quarter, obviously, we had we did a couple of NCD
189 more turns of this transcript: log in to Stocksigma to read the full call.