HSBC downgraded CreditAccess Grameen to hold and slashed its target price to Rs 810, citing concerns over prolonged recovery in the microfinance institution (MFI) sector. The brokerage noted that credit costs are likely to remain elevated until the second quarter of FY26, and event-risk conditions are expected to persist. Additionally, CreditAccess Grameen’s lowered guidance, coupled with compounding stress in the sector, led HSBC to cut its FY25 and FY26 EPS estimates by 28% and 10%, respectively, following an earlier reduction.
This downgrade comes after the stock plummeted 17% in yesterday’s trade, driven by weak investor sentiment following the management’s commentary on near-term challenges. The company highlighted higher-than-anticipated delinquencies and credit costs in its unsecured lending portfolio, raising concerns about its earnings recovery timeline. HSBC believes these challenges will continue to weigh on the stock, and earnings may take longer than expected to recover.