Fusion Finance faces the risk of losing going concern tag, says Deloitte

Microfinance company Fusion Finance may cease to be a "going concern" if lenders recall loans immediately or if it fails to raise resources, independent auditor Deloitte Haskins & Sells said.

Fusion has breached various financial covenants in respect of borrowings of Rs 5,618 crore. This means banks can demand immediate repayment of the loans.

"The company's ability to continue as a going concern is dependent on obtaining waivers from demand by lenders for immediate repayment of borrowings for a period of at least 12 months from the balance sheet and / or securing sufficient funds from other resources such as a successful sale of loans, rights issue and refinancing of borrowings," the audit firm said in a note.


Shares of the company ended 5% lower at Rs 169 on the BSE Monday.

The MFI is negotiating with lenders for a waiver on their right to demand immediate repayment of the loans but has not yet received any favourable response.

"This condition results in material uncertainty which may cast significant doubt on the company's ability to continue as a going concern, and therefore the company may not be able to realise the assets and discharge its liabilities in its normal course of business," Deloitte said.

Fusion posted a net loss of Rs 305 crore for the quarter ended September against a net profit of Rs 126 crore in the year-earlier period amid a surge in credit cost to 6.6% from 3.3%. Its asset quality deteriorated with gross non-performing assets jumping to 9.4% from 2.7%.

“During Q2 FY25, we continued to experience the impact of delinquency trends seen industrywide, making this a tough quarter ... We have also curtailed our growth, resulting in muted AUM (assets under management) numbers QoQ basis," Fusion managing director Devesh Sachdev said Friday. “Our ECL (expected credit loss) provisioning for this quarter is higher, thus impacting our overall profitability.”

Its operating profit, however, rose 17.4% to Rs 284 crore, while capital adequacy ratio stood at 24.4%. AUM fell 5.1% to Rs 11,571 crore.