CreditAccess Grameen-Madura Micro Finance merger to be completed by FY21

CreditAccess Grameen stock has been trading at life-time highs. What according to you has been contributing to the growth of the company and what are the growth drivers going forward?

Stock trading is the market's behaviour. We do our business well and that is the contribution from our end. The infrastructure, manpower, the branches we have built in quarter one and quarter two are expected to grow. We expect to grow similarly in Q4 as well as Q1 going forward. We opened almost 250 new branches in the year so far and added almost 5,000 new employees in multiple territories. This will give us decent growth and that is what has happened so far.

What is the guidance on your loan growth? Which are the segments that you think will be focusing on accelerating loan growth?


Our microloans have been growing at about 48-49% in the last four-five years on a CAGR basis. Going forward, probably, it will be slightly lesser. On a long term basis, it may be at 30% CAGR in five years going forward. The stability will remain in microfinance considering the potential of the market across Indian geography. We see huge potential, particularly in rural areas. More than 70 million unbanked population in rural India is one big potential for Credit Access Grameen as we specifically operate in rural geography. We see stable growth going forward.

Overall asset quality has remained strong, however, in the last quarter we saw higher provisioning. The GNPA ratio was up by 33 bps. Do you see higher NPAs in the coming quarters?

In Q2, there were floods in a couple of districts that will have a small GNPA impact and also we faced some difficulty in two districts in Karnataka. But these situations are normal for microfinance. Eventually, we will not be having more than 1% credit cost for us. We have to control it in a better way and our business is built on a strong model; we will be coming back faster. We do not expect an increase of credit cost beyond 1% in any case.

Which geographies are showing higher growth for you? What will be your focus areas going forward?

Our aim is to get into many districts. We do not look at the state as geography; every district has growth potential for us, but this year expansion mostly happened in the northern part of the country, particularly Odissa, Jharkhand, Bihar, UP, Rajasthan, Gujarat and this will give a faster growth this and next year. The existing territory will grow continuously so that will give us a higher volume. Old geography like Karnataka, Maharashtra would grow only 15-16% whereas other areas might grow close to 50% and that is our growth potential this year.

You have guided for a profit of Rs 425-450 crore in FY20; are you on track to achieve this and what is your profit guidance for FY21?

We are on track with our FY20 profitability guidance but we are yet to decide the same for FY20-21. Most likely, we will decide by Q1.

The acquisition of Madura Micro Finance has been completed with all the required approvals. When do we see the synergies starting flowing in?

The merger of Madura with us has two stages: First stage is the acquisition of 76% of the controlling stake which we expect to happen before 31st March. We have RBI approval and after that, we have to go to the next process which will probably take six to eight months as it is normally a long term process with the NCLT. We expect the merger to get completed FY20-21.

What is the market share you are eying in the MFI space? SFBs and banks still command 70% of MFI loans; do you see this shifting more in favour of the NFC MFI?

Yes, because of the ability of NBFC MFI to work in rural areas is higher than that of SFBs. Potential is quite high in the rural areas if you see the unbanked population. NBFC MFIs operating in rural areas have a higher ability to acquire more customers going forward.