India’s Leading Microfinance Lender’s Stock Surges 16 Per Cent in a Month; Key Factors to Watch Before Earnings Announcement
MFIN’s new cap limiting borrowers to three lenders, originally set for January 2025, has been deferred to April 2025, easing investor concerns and boosting microfinance stocks like CreditAccess Grameen
India’s leading microfinance NBFC, CreditAccess Grameen, will announce its Q3 FY25 results today, January 24, 2025. The company’s stock surged 16.35 per cent over the past month, opening at Rs 961.05 on NSE today. Let’s dive into the factors behind this rally.
Recent Updates
Funding Boost (November 2024):
CreditAccess Grameen secured €25 million from DEG and Rs 170 crore from Citi through a co-financing facility, strengthening liquidity, diversifying risks, and enhancing financial resilience.
Income Tax Demand (December 2024):
An income tax demand of Rs 46.03 crore for FY23 was addressed, with a stay order granted after the company’s appeal, demonstrating regulatory compliance.
Shareholding Trends (December 2024):
Promoter holding slightly decreased to 66.50 per cent, while FIIs and DIIs reduced stakes by 1 per cent and 0.69 per cent, respectively, indicating mixed institutional sentiment.
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Key Factors Driving Stock Surge
Regulatory Deferment:
MFIN’s new cap limiting borrowers to three lenders, delayed from January to April 2025, eased concerns and supported a rally in microfinance stocks like CreditAccess Grameen.
Valuation Appeal:
The stock trades at a price-to-book (P/B) value of 2.15x, below its three-year median P/B of 3.8x but higher than the industry average of 1.82x. Its RoA of 5.7 per cent and RoE of 24.8 per cent further enhance its attractiveness.
The microfinance sector faces profitability challenges due to rising credit costs and compressed net interest margins, as highlighted by ICRA. Investors will closely monitor today’s earnings for insights on asset quality, credit growth, and net interest margins (NIMs). Upcoming macroeconomic events, including February’s RBI MPC meeting, will also influence stock performance.
Founded in 1999, CreditAccess Grameen provides microfinance services to women organized into Joint Liability Groups. It offers a range of financial products, including emergency, home improvement, and retail loans, along with life insurance and training programs.
Disclaimer: This article is for informational purposes only and should not be considered investment advice.