CreditAccess Grameen Shares Fall By Over 7% After Goldman Sachs Downgrades Its Rating To 'Sell'

CreditAcces Grameen, the Bengaluru-based microfinance institution, has started the last trading day of the week on a negative note. The company shares collapsed on the very first hours of the trading session on Friday, November 29. This came to pass after renowned financial institution Goldman Sachs downgraded the microfinance company's rating.

Goldman Sachs Downgrades to 'Sell'

This is seen as a major development as Goldman Sachs has cut the target price by a major 60 per cent. And, most importantly has downgraded its rating from the previous 'Buy' to 'Sell'.

The cut in price target has brought down the target from Rs 1,426 earlier to Rs 564 per share.

This cut and change in rating is being attributed to the reduction in asset quality of the company in the second quarter of the fiscal year, that concluded in September. This is a factor that was underscored by Goldman Sachs.

In addition, we look at the other parameter of the company, indicating the said decline of asset quality, the company's gross NPA increased by 97.6 per cent. This meant a doubling of NPA, increasing by 107.5 per cent. The CreditAccess Grameen assets under management slumped significantly by 5.9 per cent.

Scrutiny on MFIs

In addition, the realm of scrutiny that has been unleashed upon Microfinance Institutions (MFI) as a result of the practices and strategies employed by these companies has also alarmed observers.

According Goldman Sachs, this added scrutiny could further add the decrease in the quality of assets of the company.

Post the previous MPC meeting, the RBI governors had issued a warning to MFIs asking them to mend their ways.

In addition, the RBI also imposed restrictions on certain MFI. In October, the central bank barred from Asirvad Microfinance, Arohan Financial Services, and DMI Finance.

When we look at the company shares, they took a nose dive in the very first hour of the day's trade.

The share of CreditAccess Grameen dipped by over 8 per cent earlier, before gaining some ground. However, the share continues to trade with deep cuts. At the time of writing, the share value dipped by 7.05 per cent or Rs 69.50. This took the overall value of shares to Rs 916.80 per piece.