Intiating Coverage: CreditAccess Grameen Ltd
16-03-2023

CreditAccess Grameen Limited: Initiating Coverage

About the Company:

CreditAccess Grameen Limited is a registered NBFC - Microfinance Institution with the RBI, engaged in providing microfinance services to women who are enrolled as members and organized as Joint Liability Groups.Its primary focus is to provide income generation loans to its customers in rural areas, while also providing other categories of loans such as family welfare loans, home improvement loans and emergency loans to its existing customers.

Micro-Finance Industry overview:

Indian MFI industry comprises of various entities serving the bottom of the pyramid including Non-Banking Financial Companies - Micro Finance Institutions (NBFC-MFIs), Banks, Small Finance Banks (SFBs), NBFCs, and non-profit MFIs. At the end of Sept 2022, the Indian microfinance industry’s total gross loan portfolio (GLP) stood at 300,974 Cr, with 6.2 Cr unique borrowers which has crossed only one-third of market penetration. The NBFC-MFI segment accounted for 35.2% of the universe portfolio. The urban-rural mix reveals that over 45% of the urban market has been penetrated while the rural market has merely crossed 25-30% levels, providing huge opportunity for MFI to provide credit to underserved segment.

Micro Finance Credit & Borrowers

MF loan ticket size for the industry has grown by 23% from INR 39,286 to INR 48,544 per unique borrower between Mar20 to Sept22.

Source: MFIN

Financials:

 

FY22

FY21

Advances

15,466.3 Cr

11,011.2 Cr

Net Interest Income

1527.68 Cr

1755.40 Cr

PAT

357.10 Cr

131.40 Cr

Deposits

14,050.4 Cr

12,135.7 Cr

Branches

1,635

1,424

 

CreditAccess (CA) is the largest NBFC-MFI in India, has been able to grow loan book at 35.2% over FY18-22 period. CA has strategically grown its branch network & employee count in rural India which is relatively underpenetrated. CA market share across its top four states of business operations was 24.3% in Karnataka, 16.3% in Maharashtra, 9.4% in Tamil Nadu and 7.1% in Madhya Pradesh.

Company’s cost ratios have remained at the lower end of the spectrum vs. its peers due to its steady branch expansion strategy and underwriting quality. CA has been able to maintain its yield and cost of borrowing, while reducing operating expenses.

CA has been giving loans to higher vintage borrower with whom it has credit relationship. This allows it to lend higher ticket sizes and top-up these loans, increasing its revenue.  In Q2FY23 CA average loan amount grew by 9.4% to 47,364 from 43,287in Q2FY22. While for its subsidy Madura Micro Finance Limited (MMFL) grew by 42.1% from INR 24,979 in Q2FY22 to 35,487 in Q3FY23.

Business Model:

 

CreditAccess follows the Joint Liability Group (JLG) business model to meet credit demand of poor women. It is a rural-focussed (84% borrowers from rural areas in FY22) NBFC MFI. The company has developed a flexible customer-centric business model to cater to its borrower base with a wide variety of products. Apart from typical MFI loans, CA offers home improvement, family welfare and other emergency loans also under the JLG model with flexible repayment intervals. While group meetings between members and loan officers are conducted on a weekly basis, borrowers have been given the option to repay either on a weekly, fortnightly or monthly basis. We believe this helps them in maintaining high borrower retention (around 85%) which further supports its cost ratios.

Source: Company Report

 

Company on a consolidated basis held a 5.8% market share in the overall microfinance industry. Within the NBFC-MFI segment, the Company maintained its position as the largest NBFC-MFI, with 16.5% share of the total GLP of the NBFC-MFI segment.

CreditAccess Grameen has access to impact funds for funding from IFC, Blue Orchard, Microvest Funds and ReponsAbility and Triodos Investment Management. With the MNC parentage, the company can access foreign currency loans. As the size of the company grows, access to foreign debt capital will help to diversify funding and provide stability.

Management:

UDAYA KUMAR HEBBAR, MANAGING DIRECTOR  & CHIEF EXECUTIVE OFFICER

He is a seasoned banker with over 35 years of rich experience spanning across operations, including rural, agriculture, and micro-banking fields. Prior to joining CA Grameen, he held various leadership positions including Head of Commercial Banking and Payment Operations at Barclays Bank PLC.

GEORGE JOSEPH, CHAIRMAN & LEAD INDEPENDENT DIRECTOR

He is a banking industry veteran with diverse experience spanning over four decades. He retired as Chairman and Managing Director of Syndicate Bank. He was earlier associated with Canara Bank for a period of over 36 years. He also serves as a Director on the boards of Wonderla Holidays Limited, Popular Vehicles and Services Limited, and Madura Micro Finance Limited and has been associated with CA Grameen Board as an Independent Director since September 2015

CreditAccess India NV (Promoter Group)

CreditAccess India NV owns a 73.71% stake in the company and specialises in micro and small enterprise financing with operations in India, Indonesia, Philippines and Vietnam. CA India is a professionally managed company invested in by 220+ shareholders including Olympus Capital Asia (US PE firm) holding 15% and Asian Development Bank holding 9%. 

 

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