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On Monday, CLSA analysts revised their outlook on CreditAccess Grameen Ltd (CREDAG:IN), downgrading the stock rating from Hold to Underperform, despite increasing the price target from INR 960 to INR 1,050. This adjustment reflects the firm’s anticipation of continued financial stress and a subdued performance in the upcoming year.
CreditAccess Grameen reported a net profit of INR 0.47 billion for the fourth quarter of 2025, hindered by a 9% annualised credit cost. Analysts at CLSA pointed to several challenges, including issues in Karnataka, overleveraging concerns, and regulatory measures from the Microfinance Institutions Network (MFIN), leading to an expected credit cost between 5.5% and 6% for the fiscal year 2026.
The company’s management has indicated an additional six months of stress. Despite this, CreditAccess Grameen has provided steady growth guidance of 13-15% for the microfinance segment and over 18% for its overall book, bolstered by robust growth in retail finance. The analysts forecast a recovery in the company’s return on equity (ROE) to 11.9% in FY26 and potentially reaching 18% in the following two fiscal years.
The revised price target of INR 1,050 is based on 1.8 times the book value projected for FY27, a notable increase from the previous target, which implied a 1.5 times book value. CLSA’s decision to raise the price target despite downgrading the rating stems from their belief that the stock should not continue to trade at the depressed valuations seen during the Covid period.
The CLSA analysts concluded that the recent surge in CreditAccess Grameen’s stock price is unjustified, given the anticipated challenging year ahead, which led to the decision to downgrade the stock rating while adjusting the price target upwards.
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