M RochanStock in India’s largest non-bank shadow lender CreditAccess Grameen rose on Wednesday, a day after brokerage Axis Securities raised its price forecast for the company’s shares in the wake of a positive business update.
CreditAccess Grameen’s shares finished 2.8% higher at INR698.55 (US$9.49) on the National Stock Exchange, after Axis Securities retained its ‘buy’ recommendation for the microfinance institution’s stock, with a revised target price of INR745.
The revision followed a business update, published over the weekend, that showed CreditAccess’s loan disbursements for the month of August 2021 returned to pre-pandemic levels.
The provider of finance to small retailers has a market capitalisation of around INR108.78bn.
Analyst's take
Advances to customers, which picked up in July 2021 following the phased unlocking nationwide, continued to grow in August 2021. “We expect the same to continue going ahead," Axis Securities said in its 6 September note to clients.
“Subdued growth in subsidiary Madura Microfinance, along with deteriorating asset quality trends, continue to remain a cause of concern,” Axis analyst Dnyanada Vaidya wrote in the note.
“However, taking cues from the experience of tackling Covid 1.0 stress, we remain confident in CreditAccess’ robust business model and proactive approach of the management in identifying and accounting for stress,” she added.
Lending zooms
In its 5 September regulatory filing, the provider of home improvement loans said disbursements in August zoomed 200% year-on-year to INR11.88bn. Lending in August was also 7.3% higher compared to July 2021’s INR11.07bn figure. Meanwhile, collections improved too.
CreditAccess Grameen, which operates over 1,400 branches across the sub-continent, also sells life insurance to customers and their co-borrowers.
