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Key Highlights of Q3FY22 Results

* Gross NPA (@ 60 +Days Per Due(dpd)) stood at 6.02% as compared to 7.67% in the last quarter. Collection efficiency for the standalone (excl arrears) improved from 93.3% in Q2FY22 to 95.6% in Jan-22, due to relaxation of lock-down rules, resulting in the better collection. In the current quarter, the company wrote-off loans to the tune of Rs.190cr and recovered bad debts of Rs.29.2 cr. The company had aggressively written off accounts with 180 days due and thereby it expects recovery of Rs.15-20 cr every quarter going forward. Provisions for the quarter were at Rs.117.9 cr as compared to Rs. 139.9 cr in Q2FY22. Management expects credit cost to be in the range of 1.5-2% lower than ~3.6% in 9MFY22, once business stabilises.

* Consolidated gross loan portfolio increased by 18.4% yoy to Rs.14,587 cr. The consolidated customer base declined from 39.68 lakhs to 37.77 lakhs on yoy basis, primarily due to write-off. Disbursements are closer to pre-Covid levels at Rs.4,720 cr in Q3 FY22, a growth of 21% qoq. 48% of the new customers are from non-core states like Bihar, Jharkhand, UP, Gujarat, Rajasthan and Orissa. Management expects loan growth of ~17-19% growth on yoy basis in FY22 and 20-25% CAGR in next 3 years, as nearly 50-60% of the market is still unaddressed.

* On the P&L front, NII went up by 43.6%/12.5% yoy/qoq at Rs.415.0 cr, with NIM at 11.4% during the quarter as compared to 11.2% in Q2FY22. Interest income de-recognized in the quarter was Rs.22.4 cr, excluding this, NIM would have been 12.1%. Operating profit was Rs.273.5 cr, impairment on the financial instrument was Rs.117.9 cr, which includes the impact of write-off of Rs.67.4 cr. The credit cost was partially offset by INR26.8 crore bad debt recovery during 3QFY22.

OUTLOOK AND VALUATION

We believe CAG is well placed to grow and capture a 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. With improvement in economic scenario, We have a BUY rating with a revised target price of Rs.898 for 18-24 months.

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