Expanding retail finance business, improving asset quality, and a resilient rural lending franchise position the NBFC for sustained earnings growth, while Motilal Oswal projects strong profitability over the next two years.

CreditAccess Grameen witnessed strong buying interest in Thursday's trading session after brokerage firm Motilal Oswal Financial Services (MOFSL) reaffirmed its bullish stance on the stock. The brokerage maintained its 'Buy' rating and highlighted the company's successful transformation from a pure microfinance lender into a diversified rural financial services platform.

The positive research report boosted investor sentiment, with CreditAccess Grameen shares rising nearly 3% during intraday trade. The stock touched an intraday high of ₹1,540 before trading around ₹1,536.70, reflecting gains of over 2% compared to the previous close.

According to analysts, the company's improving business mix, stronger portfolio quality, and increasing contribution from retail finance are expected to drive healthy earnings growth while reducing dependence on traditional microfinance lending.

MOFSL Maintains 'Buy' Rating with ₹1,780 Target Price

Motilal Oswal Financial Services has retained its 'Buy' recommendation on CreditAccess Grameen with a target price of ₹1,780 per share. The brokerage's target implies an upside potential of nearly 16% from the current market price.

The valuation is based on 2.5 times the company's estimated FY28 Book Value Per Share (BVPS), reflecting confidence in its long-term growth prospects and improving profitability.

MOFSL believes the lender has emerged stronger after navigating the recent challenges faced by the microfinance industry and is now entering a new growth phase supported by a broader product portfolio and improving operational performance.

Strategic Shift Beyond Traditional Microfinance

For several years, CreditAccess Grameen built its business around group-based microfinance lending in rural India. However, the company is now executing a strategy aimed at becoming a full-fledged rural financial services provider.

Rather than relying solely on microfinance loans, the company is leveraging its strong customer relationships to offer higher-value retail lending products, helping meet multiple financial needs of rural households.

This strategy enables the company to deepen customer engagement, increase loan sizes, improve cross-selling opportunities, and create multiple revenue streams while reducing concentration risk within the microfinance segment.

Industry experts believe this evolution reflects the broader transformation taking place across India's rural lending ecosystem, where financial institutions are increasingly focusing on comprehensive financial inclusion rather than single-product lending.

Retail Finance Emerges as the Next Growth Engine

One of the most significant highlights of MOFSL's report is the rapid expansion of CreditAccess Grameen's retail finance business.

Retail assets accounted for nearly 18.1% of the company's total Assets Under Management (AUM) during FY26, compared with just 5.9% in FY25. The sharp increase has been driven by successful migration of existing borrowers to higher-ticket retail loan products and continued diversification of the company's lending portfolio.

The brokerage believes retail finance will be the primary driver of future growth, while the core microfinance business is expected to continue expanding at a steady pace of around 10–12% annually.

With a customer base of nearly 4.4 million borrowers, CreditAccess Grameen possesses a significant opportunity to cross-sell new financial products without incurring substantial customer acquisition costs.

Healthy Financial Growth Expected Through FY28

MOFSL expects CreditAccess Grameen to deliver strong business performance over the medium term, supported by continued investments in technology, branch expansion, digital capabilities, and operational efficiency.

The brokerage projects overall Assets Under Management (AUM) growth of 20–25% during FY27, driven largely by retail lending while maintaining stable growth in the company's core microfinance operations.

Between FY26 and FY28, MOFSL estimates:

• Assets Under Management (AUM) CAGR of around 21%

• Net Interest Income (NII) CAGR of approximately 18%

• Pre-Provision Operating Profit (PPoP) CAGR of nearly 16%

• Profit After Tax (PAT) CAGR of about 59%

These projections indicate significant operating leverage and stronger profitability as the company's diversified lending strategy gains scale.

Asset Quality Continues to Improve

Another factor supporting the brokerage's positive outlook is the improvement in CreditAccess Grameen's asset quality.

Following a period of stress in the microfinance sector, borrower behaviour has improved considerably, resulting in lower credit costs and healthier loan repayments. Stress formation has largely normalised, while the company continues to maintain conservative provisioning policies to strengthen its balance sheet.

MOFSL expects these trends to support higher earnings stability and improve investor confidence over the coming years.

The brokerage also forecasts Return on Assets (RoA) to improve to approximately 4.6% and Return on Equity (RoE) to reach around 18.8% by FY28, highlighting the company's strengthening profitability profile.

Technology and Diversification Supporting Long-Term Growth

CreditAccess Grameen's transformation is also being supported by investments in technology and operational infrastructure.

Digital lending processes, enhanced customer analytics, expanded branch networks, and improved risk management systems are expected to help the company scale its retail lending business while maintaining disciplined underwriting standards.

The diversified product mix is likely to reduce earnings volatility and improve resilience across different economic cycles, making the business model more sustainable over the long term.

Attractive Valuation Despite Recent Rally

Despite the stock's recent gains, MOFSL believes the valuation remains attractive.

The brokerage notes that the stock is currently trading at around 2.6 times its estimated FY27 Price-to-Book Value (P/BV), which it considers reasonable given the company's expected earnings growth, improving return ratios, and expanding retail finance franchise.

Analysts believe the combination of strong rural penetration, a large existing customer base, disciplined credit management, and increasing product diversification positions the company favourably within India's fast-growing NBFC sector.

Outlook

CreditAccess Grameen appears well-positioned to capitalise on rising financial inclusion and increasing demand for formal credit in rural India. As the company expands beyond microfinance into a broader retail lending platform, it is expected to strengthen customer relationships while creating new avenues for sustainable growth.

With improving asset quality, healthy AUM growth, strong profitability projections, and an attractive valuation, the company continues to receive positive attention from market participants. Investors, however, will continue to monitor credit quality, rural economic conditions, and execution of the retail expansion strategy as key factors influencing the stock's long-term performance.