Creditaccess Grameen conducted a conference call on 07 May 2024 to discuss the financial results for the quarter ended March 2024. Udaya Kumar Hebbar, MD, Creditaccess Grameen addressed the call:

Highlights:

The company has become the first standalone microfinance entity to surpass the significant milestone of Rs 25,000 crore AUM in its Silver Jubilee year of operations.

The company has been once again certified as a “Great Place to Work” for the fifth consecutive year given its purpose-oriented approach.

The company ended FY24 on a solid footing, having registered AUM growth of 27.0% yoy and 14.2% qoq to Rs 26,714 crore supported by a healthy increase in the customer base.

The customer base grew 15.3% yoy and 4.8% qoq to 49.2 lakh end March 2024. The customer addition momentum continued to remain strong as the company added over 13.5 lakh new customers during FY24 and 4.2 lakh new customers in Q4FY24 with an average of 1.1 lakh addition every month.

The expansion in the outside core markets has been playing out well as 44% of yearly customer additions came outside of the top three states.

The company added 86 branches in Q4FY2024 and 194 branches in FY24, taking total infrastructure strength to 1,967 branches spread across 383 districts end March 2024. The company also merged 13 branches to enhance operational efficiencies.

The disbursements were the strongest at Rs 8053 crore in Q4FY24, up 12.3% yoy given robust customer additions and renewal trends from the retained borrowers.

The company continues to remain one of the lowest-cost lenders with a portfolio yield of 21%, a stable cost of borrowing at 9.8%, and operating with an 11.2% interest spread.

The diversification, strong liability franchise, the highest standalone credit rating, adequate ESG disclosures and ratings, healthy capital adequacy contribute to unique positioning.

The company believes that cost of borrowing for FY25 should remain stable as the company continues to maintain a robust ALM position.

The interest spread was 11.2% and NIM stood at 13.1% in Q4FY24.

The cost-to-income ratio was healthy at 30.1% which is 10 bps lower yoy.

The company created an additional provision of Rs 26 crore towards long-term incentives and a one-time special bonus to employees while celebrating Silver Jubilee year.

The credit cost in Q4FY24 stood at Rs 153 crore partially offset by Rs 13 crore of bad debt recovery.

The collection efficiency excluding arrears stood healthy at 98.3%.

GNPA at 60 DPD stood at 1.18% and PAR 90 plus at 0.94% and net NPA at 0.35% end March 2024.

ECL provisioning stood at 1.95% higher than GNPA.

Gross Credit cost stood at 2.06% in FY24. The credit cost on account of the delinquent loan was 1.71% which included 1.52% of actual credit loss in the form of write-off and 0.19% provision in Stage-2 and Stage-3 provisioning. The remaining difference of 0.35% was on account of an increase in standard asset positioning on the Stage-1 asset basis of the revised ECL policy introduced in FY23.

Stage-1 provisioning increased from 0.82% end March 2023 to 0.92% end March 2024.

The net credit cost after incorporating Rs 48 crore bad debt recovery stood at 1.8% for FY24 in line with the guided range.

The company continues to hold over and above 100 bps higher provisioning compared to IRAC prudential norms.

PAT in FY24 grew by 75% yoy to Rs 1446 crore, leading to a ROA of 5.6% and ROE of 24.9%. The capital adequacy remained comfortable at 23.1% end March 2024.

The cross-cycle ROA and ROE over the past 8 financial years from FY17 to FY24, despite facing three external shocks stood at 3.6% and 15.0% respectively. The distinctive methodology for conducting the business in the form of a classical JL model, diverse product suite, flexibility in repayment, and continuous district-based expansion approach supported by a strong corporate governance structure ensures stability and enhances resiliency.

Guidance for FY2025

Assuming a stable operating environment, the company looks forward to achieving loan portfolio growth of 23-24% in FY2025. The core market will deliver 10-15%. The other markets - Bihar, Uttar Pradesh, West Bengal, Odisha and the new market – Telangana and Andhra should deliver higher than 25%. So, that will be an average 23%-24% growth in FY2025.

On the back of competitive lending rate and strong control on the cost of borrowing, the company foresees NIM in the range of 12.8% to 12.9%.

The cost-to-income ratio should be range bound at 30% to 31%. The company is anticipating credit cost of 2.2% to 2.4% with the write-off rate being within 2%.

Overall, the company aims to achieve ROA of 5.4% to 5.5% and ROE of 23.0% to 23.5% in FY25.

Guidance for medium term of FY2025-FY2028

Looking at the medium term from FY25 to FY28, the company expects loan portfolio growth of 20-25%, NIMs of 12.7-12.9% and cost-to-income ratio between 30% and 31%, helping keep leadership position intact.

The company expects a similar credit cost of 2.2% to 2.4% while delivering ROA of 5.4% to 5.5% and ROE of 20% to 23.5%.

The credit cost may hover between 2.2%-2.4% considering early recognition of risks and higher provision on standard assets.

Retail Finance

The progress in the retail finance portfolio continued to thrive with an AUM of Rs 708 crore end March 2024, an increase of 320% yoy.

This book has touched 2.7% of overall portfolio and it is performing extremely well with PAR 30 of around 0.07% across new products like individual business loans, mortgage-backed loans, two-wheeler loans, etc.

In line with evolving customer philosophy, the company is supporting graduated customers through retail finance products, resulting in an industry-leading customer retention rate of 88%, proof of strong customer affiliation with the brand.

The unsecured individual loan portfolio, which is being extended for graduated customers, is trending at around 72% of the overall AUM. The secured loan book comprises 28%, which includes loan against property, gold loan and affordable home loans.

The company aims to raise the retail finance loan book to 10-15% of overall AUM by FY28, which means the company may have to reach around Rs 7000-Rs 8000 crore by FY28. The company needs only about 6-7% customer conversation. So, it is more of an in-house business to expand with a very low or nil acquisition cost.