CreditAccess Grameen asset quality improves as Retail Finance drives growth

Investment View and Valuation

In its July 27, 2026 result update, ICICI Securities maintained a BUY recommendation on CreditAccess Grameen Ltd and revised its target price to Rs 1,800 from the current market price of Rs 1,555. The broker values the stock at 2.5 times FY28E book value.

The positive view is supported by healthy borrower acquisition, customer graduation into Retail Finance, improving asset quality and lower credit costs, which are expected to support sustainable growth and profitability.

Strong Q1FY27 Operating and Financial Performance

CreditAccess Grameen reported a strong Q1FY27 despite seasonal softness and 6.3 per cent write-offs. Assets under management grew 16.4 per cent year on year and 2.5 per cent quarter on quarter to Rs 30,319 crore. Disbursements increased 11.9 per cent year on year to Rs 6,107 crore, while the company added 2.5 lakh borrowers during the quarter. New-to-credit customers accounted for 35 per cent of these additions.

Net interest margin expanded to 14.4 per cent, aided by lower interest reversals and stable borrowing costs. Profit after tax rose sharply as provisions declined, resulting in an improvement in return on assets to 5.9 per cent.

Asset Quality Continues to Normalise

Asset quality improved across key indicators during the quarter. Gross non-performing assets declined to 2.18 per cent from 3.17 per cent in Q4FY26, while net non-performing assets fell to 0.76 per cent from 1.12 per cent. PAR90+ improved to 1.46 per cent from 2.28 per cent.

Monthly PAR15+ accretion averaged 15 basis points in Q1FY27, and X-bucket collection efficiency stood at 99.68 per cent. Credit cost was Rs 212 crore, or 0.72 per cent. Management said monthly PAR accretion remained around 15 to 20 basis points through the first four months. If this trend persists, FY27 credit cost could be toward the lower end of the company’s 3 to 4 per cent guidance.

The company continues to refine its BRE-based underwriting framework alongside MFIN guardrails.

Retail Finance Drives Strategic Growth

Retail Finance remained a key strategic driver, with its share of AUM increasing to 20.6 per cent, or Rs 6,262 crore, from 18.1 per cent in Q4FY26. Management is targeting a 24 to 25 per cent Retail Finance mix by FY27-end, driven by the graduation of high-vintage MFI borrowers.

All Retail Finance products, apart from the relatively small two-wheeler portfolio, are profitable. Mortgage loans are profitable before full cost allocation and are expected to achieve full profitability at around Rs 1,000 crore of AUM.

Grameen Mahi added 4 lakh customers in Q1FY27, taking its active customer base to 15.4 lakh and penetration to 34.5 per cent. Digital collections increased to 24.2 per cent from 16.3 per cent in FY26.

FY27 Guidance and Financial Estimates

Management expects nearly one lakh borrower additions per month through FY27 and reiterated Project Shakti’s goal of reaching Rs 50,000 crore in AUM by calendar 2028. It does not target a 6 per cent RoA and intends to gradually pass excess profitability from lower credit costs to borrowers through calibrated pricing actions.

Key Risks

• Lower-than-expected AUM growth could affect the company’s growth outlook.
• Volatile delinquencies could increase credit costs and constrain RoA expansion.