Likely to see more pain as Karnataka government going to pass ordinance on MFI company. This can increase NPA as it will stop the reportedly unethical practices followed by companies to recover their loan amount from their lenders. Karnatka constitute 10% of total MFI book of country in rough sense. Read the article.
Disclosure: Invested and biased.
May not be a problem for Genuine Companies like CAGrameen. Government in Karnataka wants to bring law to curb lenders who prey on borrowers. Without checking the borrower’s repay ability lenders shall not be allowed to lend. These lenders later outsource loan collection to local goons which led to some borrowers committing suicide.
CAGrameen works with borrowers to increase their income level rather than just giving loans.
In fact these suicide incident might be good for the company from Business point of view.(I feel bad writing the last line.)
Can call guidance jan 2025 Q3
considering the current scenario, we are aiming for an AUM
growth of 7%-8%, NIM of 12.8%-13.0%, credit cost of 6.7%-6.9%, ROA of 2.3%-2.4% and an
ROE of 9.5%-10.0% in FY25. The preliminary outlook for FY26 projects healthy 18%-20%
AUM growth, 4.2%-4.5% ROA and 17%-19% ROE.
It will actually benefit NBFCs registered with the RBI as these entities are exempt from the ordinance.
@StageInvesting how do you see it ?
It is in the stage of base formation (S1). Should take little more time and we expect that stage 2 would start.
The ordinance is only applicable on unregistered, illegal MFIs.
This is just fear-mongering.
For CAGL, it’s business as usual
@StageInvesting need your views on this Karnataka Ordinance and its impact on CAG. It’s effect on will be short term I believe.
We look at the charts frim technical prespective.
As mentioned earlier, it js in stage 1 .and should remain there (in a range) for 1-2 quarters .
Big big volumes with giant movement today. Something is happening in this counter.
Any industry or company expert here ?
Yes, it is due to Risk weight on unsecured credit has been reduced from 125% to 100% by RBI.
Risk weights decreased by RBI for loans to NBFCs from 125%to 100%
Highly positive for Credit access Grameen
More write offs coming in the following quarters. More pain ahead although this will lead to conservative lenders flourishing even more and the smaller ones get taken out of the equation..
I think a PAR0 in Dec’24 would naturally lead to higher Par90 in March’25. So, the lower Par0 numbers (excluding Karnataka) in March’25 should lead to lower Par 90 (excluding karnataka) in June’25. So, the improvement in Par numbers should be reflective by next quarter rather than this quarter.
