Goldman Sachs has downgraded CreditAccess Grameen to ‘Sell’ from ‘Buy’ and sharply reduced its target price to ₹564 from ₹1,426, citing growing concerns over asset quality and earnings visibility. The brokerage highlights structural challenges, including increasing borrower indebtedness and exposure to higher-risk categories, as key factors behind the downgrade.
According to the report, around 46% of the company’s AUM is tied to lender associations of three or more, while nearly 24% of borrowers have indebtedness exceeding ₹1.5 lakh. Both segments are expected to face pressure due to the new Microfinance Institutions Network (MFIN) guardrails introduced this week. Goldman Sachs predicts that these regulations could exacerbate credit risks and further strain the company’s portfolio.
In Q2FY25, CreditAccess Grameen reported a sharp decline in asset quality, a trend that Goldman Sachs expects will worsen. The brokerage has reduced its EPS estimates for FY25-27 by 40%-51%, projecting credit costs to rise to 6.6% in FY25 before moderating to 4.5% in FY26. Loan growth is also expected to decelerate due to higher write-offs under the company’s 270-day policy and lower margins from interest reversals.
Valuation concerns have also been raised, with Goldman Sachs arguing that the current stock price does not fully reflect the underlying stress in the portfolio. The firm predicts slower growth and increased credit costs will weigh heavily on the company’s financial performance in the coming quarters.
Recent Developments: CreditAccess Grameen has been navigating a challenging environment marked by macroeconomic headwinds and stricter regulatory changes in the microfinance space. The recent MFIN guidelines, aimed at reducing borrower indebtedness, have intensified scrutiny on the sector, leading to cautious investor sentiment. Shares of the company have declined in recent sessions, reflecting these growing concerns.
