Shares of CreditAccess Grameen fell 9% after Goldman Sachs downgraded the stock to ‘Sell’ from ‘Buy’ and slashed its target price to ₹564 from ₹1,426. The downgrade stems from concerns over asset quality and earnings visibility, as well as structural challenges such as rising borrower indebtedness and exposure to high-risk segments.
Nearly 24% of borrowers have indebtedness exceeding ₹1.5 lakh and approximately 46% of the company’s AUM is tied to lender associations of three or more, as per the report. The new Microfinance Institutions Network (MFIN) guardrails, which went into effect this week, are likely to put pressure on both segments. Goldman Sachs anticipates that these regulations would worsen credit risks and put further burden on the company’s portfolio.
The brokerage also noted a sharp decline in CreditAccess Grameen’s asset quality in Q2FY25, with expectations of further deterioration. Credit costs are projected to spike to 6.6% in FY25 before easing to 4.5% in FY26. Slower loan growth and higher write-offs under the company’s 270-day policy could also strain margins and profitability.
Goldman Sachs has reduced EPS estimates for FY25-27 by 40%-51%, citing valuation concerns and warning that the current stock price may not reflect the underlying portfolio stress.
As of 9:15 am, CreditAccess Grameen shares were trading 10.65% lower at Rs 881.30 on the NSE.
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