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Time of India
4 days ago
- Business
- Time of India
Signs of revival: Five listed NBFC-MFIs take Rs 2,440 cr bad loans off balance sheets in Jan-March
Kolkata: Microfinance lenders accelerated the cleansing of their balance sheets in January-March, taking a further hit on profitability as the burden of stressed loans refused to ease, with the once-reputed credit culture of bottom-of-the-pyramid borrowers waning. The write-off was part of a strategy to bite the bullet and be future-ready as the industry expects a turnaround in a quarter or two. The five publicly listed non-banking finance companies-microfinance institutions (NBFC-MFIs)—CreditAccess. Grameen, Fusion Finance , Muthoot Microfin , Satin Creditcare Network and Spandana Sphoorty —cumulatively wrote off bad loans worth Rs 2,440 crore in the fourth quarter of FY25, compared with less than Rs 300 crore in the year-ago period. The idea is to begin the fiscal year by shedding the stickiest and ageing non-performing assets from the balance sheet . Writing off loans needs full provisioning against those accounts. Accelerated write-offs require lenders to raise the provisioning level and take a larger hit on the profit and loss account. 'While challenges remain, the early signals are encouraging, showing a clear reversal,' said HP Singh, chairman of Satin, on a post-earnings analyst call. He noted that at times, only disruption can shake companies out of complacency and force a transformation. 'This perfectly captures the spirit of FY25 — a year many in India's microfinance sector might remember as a testing period, others as a wake-up call.' Satin was the sole listed NBFC-MFI that was profitable in all four quarters of FY25. Udaya Kumar Hebbar, managing director of CreditAccess Grameen , said on an analyst call, 'The rising delinquency trend in the microfinance industry, which began in April 2024, peaked in November 2024, subsequently reversing till March 2025. We are already witnessing a new PAR ( portfolio at risk) accretion rate largely getting normalised across all states, excluding Karnataka.' CreditAccess is the country's largest NBFC-MFI. Live Events HEAVY LOAD Gross non-performing assets (NPAs) before the technical write-off hit a record Rs 61,000 crore at the end of March, up from Rs 38,000 crore a year prior to that, as borrowers defaulted due to over-indebtedness. The sector's cumulative gross loan portfolio contracted by about 7% to Rs 3.81 lakh crore at the end of the March quarter, from the year earlier, as lenders slowed disbursement to prevent further loan losses. Lenders write off loans when there is no realistic prospect of recovery. Accelerated write-offs contribute to elevated credit costs, impacting the profit and loss account. Recoveries against such written-off loans, if any, will get credited to the profit and loss statement. The move was forced by growing customer overleveraging, crumbling of the joint liability model, rising staff attrition and disruptions in Karnataka and Tamil Nadu. For instance, Fusion wrote off Rs 917 crore during the fourth quarter alone, nearly 40% of the cumulative write-offs by listed NBFC-MFIs. To put this into perspective, it had written off Rs 970 crore (net of recoveries) in the past 14 years before FY25. Satin had never written off loans before FY25 despite repayment disruptions during events such as demonetisation and the pandemic. Spandana, which is now under regulatory scrutiny for alleged misreporting and suppression of fraud, wrote off Rs 1,555 crore over the four quarters of FY25. 'The MFI industry stood at a critical juncture, facing formidable challenges,' said Singh of Satin. 'Institutions had to navigate a shifting landscape, clients experienced heightened vulnerability and the sector as a whole was compelled to rethink long-held assumptions.' It forced the sector to pause, reflect and reset, he said. 'These disruptions served as a catalyst, driving deep introspection, operational recalibration and a renewed focus on fundamentals,' Singh said.
Economic Times
21-05-2025
- Business
- Economic Times
CreditAccess expects recovery amid improving PAR performance
The stock of CreditAccess Grameen has lost nearly 9% in the past three trading sessions after the country's largest listed microfinance company declared rising slippages, higher credit cost, reduced collection efficiency, and rising gross non performing assets (GNPA) ratio for the March quarter. ADVERTISEMENT On a positive note, the lender reported lower accretion in the portfolio at risk (PAR) in states other than Karnataka in the March quarter. The condition in Karnataka is expected to improve in the second half of the current fiscal year. The credit cost is expected to normalise in the second half of FY26 to around 3.5% from 7.8% in FY25. Analysts have reduced FY27 earnings estimates by 4-8%. Karnataka and Tamil Nadu, which contribute 31% and 19% to the gross loan portfolio respectively, exhibited higher delinquencies in the March quarter. An ordinance issued by these states to protect vulnerable borrowers from coercive loan recovery affected the collection efficiency. The PAR-AUM (assets under management) ratio in Karnataka and Tamil Nadu increased sequentially to 2.4% and 4.5% in the March quarter from 1.2% and 3.2% in that order. The ratio also shot up in Bihar to 7.3% from 5.3% by similar comparison though the state has a relatively small share of 4.8% in the total loan book. The company expects a reversal in the PAR trend not before the September credit cost shot up to 7.7% in FY25 from 2.1% in the previous year due to higher provisioning and write-offs. This also affected the return ratios. The return on assets (RoA) contracted to 1.9% from 5.6% in FY24 while the return on equity dropped to 24.9% from 7.7%. ADVERTISEMENT The situation is likely to improve in the current fiscal year given the possibility of a recovery from the December quarter. The company expects to limit credit cost between 5.5% and 6% for FY26 while RoA and RoE are likely to be 2.9-3.4% and 11.8-13.3% respectively. The company's gross loans fell by 2.9% to Rs 25,948 crore in the March 2025 quarter. Net profit nearly halved to Rs 47.2 crore from Rs397 crore a year ago. Net interest margin (NIM) contracted by 40 basis points to 12.7%. Motilal Oswal Financial Services has cut the FY27 earnings estimate by 10% amid higher credit cost and lower credit growth. It expects AUM growth of 18% between FY25 and FY27. The brokerage expects CreditAccess to bounce back to normalcy faster than other microfinance peers and therefore, it has raised the stock's target price to Rs1,425 from Rs1,170. The stock was traded at Rs1,101 on Wednesday on the BSE. (You can now subscribe to our ETMarkets WhatsApp channel)
Time of India
21-05-2025
- Business
- Time of India
CreditAccess expects recovery amid improving PAR performance
CreditAccess Grameen faces rising delinquencies and credit costs, but analysts expect asset quality to recover gradually from the second half of FY26. CreditAccess Grameen stock fell 9% in three sessions after Q4 showed rising slippages, higher credit cost, and weakening asset quality. Analysts cut FY27 earnings, but expect a rebound from H2FY26 as collection efficiency improves. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads The stock of CreditAccess Grameen has lost nearly 9% in the past three trading sessions after the country's largest listed microfinance company declared rising slippages, higher credit cost, reduced collection efficiency, and rising gross non performing assets (GNPA) ratio for the March a positive note, the lender reported lower accretion in the portfolio at risk (PAR) in states other than Karnataka in the March quarter. The condition in Karnataka is expected to improve in the second half of the current fiscal year. The credit cost is expected to normalise in the second half of FY26 to around 3.5% from 7.8% in FY25. Analysts have reduced FY27 earnings estimates by 4-8%.Karnataka and Tamil Nadu, which contribute 31% and 19% to the gross loan portfolio respectively, exhibited higher delinquencies in the March quarter. An ordinance issued by these states to protect vulnerable borrowers from coercive loan recovery affected the collection PAR-AUM (assets under management) ratio in Karnataka and Tamil Nadu increased sequentially to 2.4% and 4.5% in the March quarter from 1.2% and 3.2% in that order. The ratio also shot up in Bihar to 7.3% from 5.3% by similar comparison though the state has a relatively small share of 4.8% in the total loan book. The company expects a reversal in the PAR trend not before the September credit cost shot up to 7.7% in FY25 from 2.1% in the previous year due to higher provisioning and write-offs. This also affected the return ratios. The return on assets (RoA) contracted to 1.9% from 5.6% in FY24 while the return on equity dropped to 24.9% from 7.7%.The situation is likely to improve in the current fiscal year given the possibility of a recovery from the December quarter. The company expects to limit credit cost between 5.5% and 6% for FY26 while RoA and RoE are likely to be 2.9-3.4% and 11.8-13.3% company's gross loans fell by 2.9% to Rs 25,948 crore in the March 2025 quarter. Net profit nearly halved to Rs 47.2 crore from Rs397 crore a year ago. Net interest margin (NIM) contracted by 40 basis points to 12.7%. Motilal Oswal Financial Services has cut the FY27 earnings estimate by 10% amid higher credit cost and lower credit growth. It expects AUM growth of 18% between FY25 and FY27. The brokerage expects CreditAccess to bounce back to normalcy faster than other microfinance peers and therefore, it has raised the stock's target price to Rs1,425 from Rs1,170. The stock was traded at Rs1,101 on Wednesday on the BSE.
