CreditAccess Grameen Sees Rise in Asset Quality Stress and Decline in Collection Efficiency During Q2 FY25

CreditAccess Grameen Sees Rise in Asset Quality Stress and Decline in Collection Efficiency During Q2 FY25

Microfinance lender CreditAccess Grameen Ltd, listed on the BSE, experienced a rise in asset quality stress in the second quarter (Q2 FY25) of 2024, reflected by increased overdues and a drop in collection efficiency compared to the previous quarter. According to a filing with the BSE, the lender's portfolio at risk (PAR), which includes loans overdue for 30 days or more, climbed to 3.3% in September 2024, up from 1.8% in June 2024 (Q1 FY25). The PAR for loans overdue for more than 60 days also saw a significant rise, reaching 2.4% in Q2, up from 1.4% in Q1. Similarly, loans overdue for more than 90 days increased to 1.7%, compared to 1.1% in the previous quarter.

This decline in asset quality also impacted the company’s stock price, which dropped 2.96% to close at ₹1,119.4 per share. Furthermore, CreditAccess Grameen's collection efficiency, which includes arrears, fell to 96.2% in Q2 FY25, compared to 97.9% in Q1.

Disbursements and AUM Performance

The lender's loan disbursements decreased 11% quarter-on-quarter (Q-o-Q) to ₹4,004 crore in Q2 FY25 from ₹4,476 crore in Q1 FY25. Year-on-year (Y-o-Y), the disbursements saw a 19% decline from ₹4,966 crore in Q2 FY24. Additionally, its assets under management (AUM) contracted by 4% Q-o-Q, falling to ₹25,133 crore in September 2024 from ₹26,304 crore in June 2024. Despite this, the AUM still reflected a 12% year-on-year growth from ₹22,248 crore in September 2023.

Impact on Asset Quality and Business Outlook

The rise in overdue loans and the dip in collection efficiency highlight the ongoing pressure on CreditAccess Grameen’s asset quality. The reduction in disbursements and AUM contraction further reflects challenges in expanding its loan book amid rising stress. The company's performance in the next quarters will be crucial in determining how well it navigates these operational hurdles and asset quality risks.