Given the relatively lower valuation, higher quality of the loan assets, and majority rural-focused business, one can invest for long only theme with one-year target near Rs 480-500, said an expert
CreditAccess Grameen share price recovered sharply from its day's low but still traded below the issue price of Rs 422 on the BSE.
The stock opened at Rs 393 on the National Stock Exchange and the listing price on the BSE was Rs 395.6 per share, a discount of 7 percent and 6 percent, respectively.
The stock hit an intraday high of Rs 419.40 and low of Rs 385. At 12:22 pm, the stock was trading at Rs 418.40 on BSE — 0.85 percent lower to issue price. At Rs 418.40, the stock is still at a 8.68 percent premium to pre-opening price.
It has seen nice recovery to trade near its issue price, rising 9 percent from day's low.
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As expected, listing was tepid, but now the question is — what should investors do going forward?
"If by any scenario the stock declines below or near Rs 400 levels, we would like to advise investors to 'Accumulate' as we think CreditAccess Grameen (CAG) business fundamentals are strong unlike other micro-finance players with mixed exposure to urban/rural markets," Prashanth Tapse, AVP Research of Mehta Equities told Moneycontrol.
"We found that CAG is a pure rural play with 82% of its branches catering to rural markets which acts as the main catalyst for long-term investment holding for 2-3 years," he said.
Astha Jain, Senior Research Analyst at Hem Securities advised investors to hold shares for long term, that is for a period of a year or so.
On being asked about the stock's one-year target, Jain said it is 10-15 percent above issue price.
Given the relatively lower valuation, higher quality of the loan assets, and majority rural-focused business, one can invest for long only theme with one-year target near Rs 480-500, Tapse feels.
On an overall basis, Tapse believes investors will get good opportunity levels to tap the opportunity to invest in CAG as a next long only investment idea in microfinance space. "Microfinance industry has exhibited impressive business growth over the past few years and company with a clear focus on rural customers whose access to the formal banking sector is limited would witness healthy growth going forward."
On valuation front, post-IPO equity CAG is expecting a market cap Rs 6,050 crore at higher price band, valued at 2.9x the book value, which is on the lower side of the average to its listed peers, he feels.
Anita Gandhi, Whole-Time Director, Arihant Capital Markets said the businesses in this profile have generally done well in long term.
Creditaccess Grameen, which raised Rs 1,131-crore through its initial public offer during August 8-10, is focused on providing micro-loans to women customers predominantly in rural areas in India. It provides loans primarily under the joint liability group (JLG) model.
The company's total revenue grew at 48 percent CAGR (compounded annual growth rate), while its net interest income grew at 54 percent CAGR, from FY15-18.
The company's profit grew at 37 percent CAGR over the same period. Its CRAR (capital to risk (weighted) assets ratio) was 28.08 percent, 21.48 percent, 29.71 percent and 28.94 percent as on the end of March 2015, 2016, 2017 and 2018, respectively. This is well above the regulatory requirement of 15 percent.