The Corner Office Interaction with the Mr. Ganesh Narayanan joined CREDAG in Jan’20 as the Chief Business Officer by Motilal Oswal Financial Services Ltd
Scaling rural retail: MFI as the funnel, retail as the growth engine
We hosted the senior management of CreditAccess Grameen, represented by Mr. Ganesh Narayanan (MD & CEO) and Mr. Nilesh Dalvi (CFO), for investor meetings in Mumbai. CreditAccess Grameen (CREDAG) reiterated its confidence in delivering 20-25% AUM growth in FY27 and sustaining a 20%+ medium-term AUM CAGR, underpinned by the vast untapped rural credit opportunity and its aspiration to achieve INR500b AUM by CY2028. While microfinance will remain the cornerstone of the franchise, management outlined a clear roadmap to build a diversified rural retail lending platform, with highervintage MFI borrowers progressively graduating into individual lending, mortgage, and other retail products. This strategy, combined with disciplined underwriting, technologyled execution, and conservative provisioning, is expected to support a through-cycle RoA of 4%+ while reducing earnings volatility.
MFI to remain the acquisition engine; retail finance to fuel long-term value creation
* Management reiterated that microfinance will continue to serve as the primary customer acquisition engine, while Retail Finance (RF) will increasingly become the key growth driver. Customers with a satisfactory repayment history and typically 6-8 years of relationship with the company are gradually migrated (6-8% on average per annum) to higher-ticket retail products, enabling stronger customer engagement, lower acquisition costs and improved wallet share. To accelerate this transition, CREDAG has established a dedicated call center team to generate qualified retail lending leads for field teams, further strengthening the customer graduation journey.
* The company expects Retail Finance to account for more than 25% of AUM by the end of FY27 vs. 20.6% as of Jun'26, reflecting successful execution of its "follow-thecustomer" strategy. Importantly, individual loans and mortgage products are largely offered only to customers with credit scores above 710 and a minimum vintage of six years with the company, highlighting its conservative customer selection framework.
Retail lending scaling up in a calibrated and disciplined manner
* The retail portfolio (~INR56b) currently comprises two flagship products:
* Unnati - the flagship individual business loan with an average ticket size of ~INR270k, seven-year tenure, and borrower bureau scores typically above 700.
* Unnati Light - designed primarily to address RBI regulations relating to non-qualified group loans, with an average ticket size of ~INR70k.
* Given the relatively higher complexity of individual lending, the company has strengthened its underwriting architecture by deploying dedicated branch credit managers, allowing field officers to remain focused on customer servicing and collections while enhancing credit quality
Valuation and view
* The management meetings with investors reinforce our constructive stance on CREDAG. The company is executing a well-defined strategy of transforming itself from a pure-play MFI into a diversified rural retail lender, while retaining the inherent strengths of its microfinance franchise. The "MFI as the funnel, retail as the growth engine" strategy, coupled with disciplined customer selection, technology-led underwriting, and one of the industry's most conservative provisioning frameworks, should enable the company to sustain superior profitability through cycles. With asset quality remaining exceptionally strong, borrower additions expected to accelerate and retail penetration steadily increasing, we believe CREDAG remains well positioned to deliver 20%+ medium-term AUM CAGR while sustaining RoA above 4% and RoE of 16-18%.
* We estimate a CAGR of 21%/68% in AUM/PAT over FY26-28E, leading to RoA/RoE of ~5.1%/20% in FY28. CREDAG trades at 2.5x FY27E P/BV, and given its superior execution, we expect its premium valuations over its MFI peers to be sustained. Reiterate BUY with a TP of INR1,880 (based on 2.5x Mar’28E P/BV).
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