The share price of this microfinance NBFC plunged 13 percent on Friday following a significant downgrade by Goldman Sachs, which slashed the stock’s target by 42 percent. The firm cited concerns over lower return ratios driven by increased competitive intensity and potential regulatory actions.
Share Price Movement
During Friday’s trading session, CreditAccess Grameen Ltd‘s share price dropped to an intraday low of Rs.858.80, declining nearly 13 percent from the previous close of Rs.986.30. Over the past year, the stock has delivered negative returns of 46 percent, while its five-year returns stand at approximately 13 percent.
What happened
Goldman Sachs has downgraded its rating on CreditAccess Grameen Ltd., citing a challenging earnings outlook. The microfinance-focused NBFC saw its shares drop over 6 percent on November 29 following the brokerage’s shift from a ‘buy’ to a ‘sell’ rating.
The revised target price of Rs.564, significantly lower than the earlier Rs.1,426, reflects a 42 percent downside from the previous close.
The downgrade highlights concerns over the company’s asset quality, which Goldman Sachs believes may continue to deteriorate, driven by industry-wide over-leveraging and stricter regulatory measures introduced recently.
The firm also pointed out that declining asset quality in the previous quarter was an unexpected setback, and heightened competition alongside reduced growth potential in highly penetrated states could further pressure return ratios and performance.
Also read….
Financial Performance
For the quarter ending September 2024, the company reported a 20.77 percent YoY rise in net interest income to Rs.932.4 crore, up from Rs.772 crore in Q2FY24. However, on a QoQ basis, operational revenue declined by 2.11 percent from Rs.952.5 crore in Q1FY25.
Net profit saw a sharp decline of 46.36 percent YoY to Rs.186.1 crore in Q2FY25, compared to Rs.347 crore in Q2FY24, and dropped 53.20 percent QoQ from Rs.397.7 crore in Q1FY25.
Important Financial Ratios
The company’s return on equity (ROE) stands at 24.8 percent, reflecting its profitability. Its stock is trading at a P/E ratio of 11, notably lower than the industry average of 23.13, suggesting potential undervaluation. As of Q2FY25, the company reported a net interest margin of 13.5 percent and a cost-to-income ratio of 30.70 percent, indicating efficient cost management relative to income generation.
Company Profile
CreditAccess Grameen Limited (CA Grameen) is an Indian microfinance institution based in Bengaluru. It primarily provides microloans to women in rural areas, empowering low-income households. Established in 1999, CA Grameen operates across 388 districts and has nearly 2,000 branches, focusing on community-based lending through Joint Liability Groups.
Written by – Siddesh S Raskar
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
Start Your Stock Market Journey Today!
Want to learn Stock Market trading and Investing? Make sure to check out exclusive Stock Market courses by FinGrad, the learning initiative by Trade Brains. You can enroll in FREE courses and webinars available on FinGrad today and get ahead in your trading career. Join now!!
