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CREDAG remains firmly on an improving earnings trajectory, reporting PAT of Rs5.0bn and ROA of 5.8% in 2QFY27, driven by improved margins and higher other income, partly offset by elevated provisions. AUM growth accelerated to 19.5% yoy, supported by strong traction in retail finance, whose share rose to ~23%; management reiterated AUM growth of 20–25% in FY27. NIM improved by 70bps qoq to 15.1%, with FY27 guidance revised to 14.4%–14.7% vs 12.8%-13.2%. Management expects to cut lending rate by 50bps each in 3Q and 4Q, while borrowing costs are expected to remain at 9.2%–9.3% by Mar27, with limited impact from ECB refinancing. Asset quality continued to improve, with GNPA improving to 1.8% and PAR improving to 2.1%. However, management has observed early signs of drought-related stress in select Maharashtra districts in Oct-26, with borrowers seeking repayment extensions, including through restructuring, prompting a temporary slowdown in customer acquisitions. However, no on-ground impact has been observed in other geographies so far. Credit costs are expected to rise marginally in 3Q but remain within the FY27 guidance of 3.0%–4.0%. Management also raised ROA guidance to 5.2%-5.8% from 4.0%-4.8%. We fine-tune our estimates and expect ROA to remain at ~5% over FY27-29E. Thus, we retain BUY with revised TP of Rs1,500, valuing the bank at 1.8x Sep-28E ABV.

Growth accelerates; margin expands

CREDAG’s GLP growth accelerated to 19.5% yoy/2.1% qoq, driven by continued traction in the retail finance portfolio. The MFI book remained muted sequentially, largely due to write-offs, while CREDAG expects group loan growth to gradually improve in 2HFY27. NIM improved by 70bps qoq to 15.1%, supported by lower interest reversals in the group loan book, a higher share of individual loans, stable borrowing costs, and stronger capital position. Further, management plans to cut lending rates by 50bps each in 3Q and 4Q, while borrowing costs are expected to remain at 9.2–9.3% by Mar-27, with limited impact from ECB refinancing as new borrowings are broadly in line with repayments. The mgmt.. revised its guidance for NIM to 14.4%-14.7% vs 12.8%-13.2% and re-iterate its AUM growth of ~20-25% in FY27.

GNPA improved; credit cost to remain within guidance

CREDAG’s GNPA improved by 39bps qoq to 1.8%, while overall PAR improved by 10bps to 2.1%. Monthly PAR additions rose temporarily in Aug-Sept due to excess rainfall, flooding, and festive disruptions, with emerging drought-related stress in select MH districts prompting a temporary slowdown in customer acquisitions. Management expects credit costs to rise marginally in 3QFY27 but remain within its FY27 guidance of 3–4%.

We retain BUY with revised TP of Rs1,500

We fine-tune our estimates and expect ROA to remain at ~5% over FY27-29E from 2.6% in FY26. Thus, we retain BUY while revising our TP to Rs1,500, valuing the bank at 1.8x Sep-28E ABV. Key risks: Slower-than-expected recovery in MFI, macro-micro dislocation, and management attrition

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