Share Price of CreditAccess Grameen Declines on Significant Q3 Net Loss

Shares of CreditAccess Grameen dropped sharply by 18% in the morning session of January 27, 2025, as the company reported disappointing financial results for the Q3 FY25. The profitable microfinance lender posted a net loss in the same quarter last year, sparking a sell-off across the microfinance sector.

What Caused CreditAccess Grameen's Shares to Fall?

The sharp decline in CreditAccess Grameen's share price is due to its poor Q3 FY25 performance. Key highlights include:

• Net Loss for Q3 FY25:

The company reported a net loss of ₹99.5 crore, a dramatic reversal from a net profit of ₹353.4 crore recorded in Q3 FY24.

• Net Interest Income Growth:

Despite the loss, net interest income (NII) increased by 6.4% year-on-year to ₹905.5 crore, reflecting growth in core lending activities.

• Sectoral Stress:

The broader microfinance sector faces challenges, impacting investor sentiment across similar stocks.

Impact on Other Microfinance Stocks

The poor performance of CreditAccess Grameen created ripple effects in the microfinance sector:

• Spandana Sphoorty Financial: Hit its 5% lower circuit at ₹308 per share.
• Fusion Finance, Equitas Small Finance Bank, IndusInd Bank, and AU Small Finance Bank: Declined between 2% and 8%.

At 9:40 AM, CreditAccess shares were trading at ₹778 per share, down 15.1%.

Q3 FY25 Performance of CreditAccess Grameen

Here's a summary of the company's key financials for Q3 FY25:

The company attributed its losses to lower margins, interest reversals, and accelerated provisions due to asset quality issues in the microfinance sector.

Key Insights from CreditAccess Grameen

• Customer Repayment Trends:

The company stated that approximately 84% of its customers have consistently repaid loans on time, which is a positive signal amidst the challenging environment.

• MFIN Guardrails 2.0 Implementation:

CreditAccess Grameen estimates that nearly 80% of its customers can be retained post-implementation of the new guidelines.

Summary

CreditAccess Grameen's Q3 FY25 results have highlighted the ongoing stress in the microfinance sector, with significant losses and rising credit costs affecting its performance. The sectoral impact has been widespread, causing other microfinance stocks to decline sharply. While CreditAccess Grameen remains optimistic about its customer retention and long-term growth, the near-term challenges have raised investor concerns.