Fusion Finance to bet on MSMEs, expects better show in Q3

Kolkata: Kolkata: Microfinance company Fusion Finance is expecting to turn around from the third quarter, while the company would seek to lower concentration risk by increasing the share of secured lending to micro, small and medium enterprises, chief executive Sanjay Garyali told ET.

"The growth is kicking in in the MSME space. The priority would be MSME in the next two years," Garyali said in his first ever media interaction after assuming the role of chief executive in March.

He said that the company will be aiming to take the share of MSME book to 18-20% by the next two years from 8% at present.


The lender's assets under management (AUM) contracted 37% year-on-year to Rs 7,688 crore at the end of June, from Rs 12,193 crore a year ago, after it slowed loan disbursals to the overleveraged and defaulting bottom-of-the-pyramid borrowers.

Garyali said that 44% of the AUM is of new loans with 6 months of average life and the new loans are showing a better repayment record than the old portfolio. Overall, it has seen a collection efficiency of 98.6%, up from 96.6% nine months back.

The stress in the sector led to a consecutive five quarter net loss for Fusion. It suffered a Rs 92 crore loss in the first quarter of the current fiscal after Rs 1225 crore annual loss in FY25.

Garyali expected credit costs to come down further in the second quarter helping it to get closer to making profit. The credit cost has been sequentially lower for the third consecutive quarter -- Rs 178 crore in the first quarter of FY26, Rs 253 crore, Rs 571 crore, Rs 693 crore in the fourth, third and second quarters of FY25 respectively.

Its gross non-performing assets ratio remained steady at 5.4% at the end of June as compared with the year-ago position but came down from 7.9% seen three months back.

The accelerated write off helped the company bring down the bad loan ratio from the book.

Fusion management has made a change in its loan write-off strategy. It has decided to write-off ageing bad loans after 180 days of default instead of the previous practice of 240 days.