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Key Highlights of Q4FY21 Results

* Consolidated gross loan portfolio increased by 13% yoy to Rs.13,587 crores. adjusting for the accelerated write-off of Rs 273 crores, the gross loan portfolio would have been grown by 16% Y-o-Y to Rs.13,860 crores. Consolidated costumer base declined from 40.54 lakhs to 39.12 lakhs primarily due to write-off. Disbursement was up 42% yoy and 3% qoq at Rs.4,726 crores, with new disbursement at over 69% of the overall portfolio.

* On P&L front, NII grew by 27% yoy at Rs.374.7 crores, with NIM at 11.3% during the quarter as compared to 12.1% in Q4FY20. Cost of borrowings fell to 8.9% as compared to 9.6% yoy, however fall in yields was sharper (100 bps yoy) to 18.6%, resulting in lower NIM. Income from direct assignment was at Rs.89 crores as compared to 15.1 crores qoq, resulting in Cost/ Income ratio at 32.7% as compared to 46.5% in the last quarter. PAT grew by 82.8% yoy to Rs.56.3 crores in Q4FY21.

* Company is well capitalized with Tier-I at 25.5% and CAR at 26.8%. Bank has maintained healthy liquidity with 15% of total AUM in cash and cash equivalents.

* Gross NPA (@ 60 +DPD) stood at 4.43% with provisions at 5.01% (incl 0.9% additional Covid buffer). Collection efficiency (excl arrears) improved to 94% in March-21 as compared to 91% as on Dec-20, with improvement across various states. Creditaccess is anticipating the collections to witness a temporary decline of 5-6% in Q1FY22 on account of several intermittent lockdowns, restrictions being imposed across states. As a result, it has decided to create additional Covid buffer of Rs.120 crores (0.9%) in Q4FY21. The company has restructured assets to the tune of 0.73% of total assets, wherein it has provided 74% on it. We expect asset quality will be impacted in Q1FY22 on account of lockdown, however due to accelerated provisions in Q4FY21, we expect credit cost to be lower in FY22 as compared to FY21.

OUTLOOK AND VALUATION

We believe CAG is best placed to grow and capture high market share on account of its strong capital base supported by strong parentage, focus on under penetrated rural areas and early stress recognition practice. Going forward, with pick up in loan growth and lower credit cost in medium term, we expect CAG to report ROA/ROE of 4.1%/18.4%. We have a BUY rating with revised target price of Rs.834 for 18-24 months.

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