Fusion Finance Ltd on May 26 reported a net loss of Rs 1,224.54 crore for the financial year ended March 31, 2025 (FY25), marking a sharp reversal from the Rs 505.29 crore profit recorded in FY24.
The company's statutory auditor, Deloitte Haskins & Sells, issued a qualified audit opinion, flagging the company’s decision not to retrospectively adjust previous financials for expected credit loss (ECL) provisions amounting to Rs 1,864.91 crore, citing impracticability.
Deloitte said it could not verify this justification due to insufficient and inappropriate evidence, noting that similar concerns had been raised in previous quarters.
The auditor also raised a material uncertainty over Fusion's ability to continue as a going concern. The company breached covenants on borrowings worth Rs 4,762.62 crore, though it has secured short-term waivers or extensions for the majority of this amount.
As of March-end, 86 percent of the covenant breaches had received lender waivers, and the company continues active discussions with remaining lenders.
"There has not been a single recall of funds from lenders under the covenant breaches," said Fusion Finance MD Devesh Sachdev during an earnings call on May 26 . "We are very actively engaged with all lenders and were among the first institutions to proactively highlight the sectoral issues. This has bolstered our credibility.”
Despite the challenges, Fusion raised Rs 585 crore in fresh debt in Q4FY25 and Rs 5,040 crore over the full year, including over Rs 1,000 crore via direct assignment.
Management commentary, strategy
The management emphasised that the company’s current challenges stem from broader sectoral stress rather than institution-specific issues.
“We are far better-placed in terms of capital adequacy and leverage, compared to other players in the industry,” said the MD. Fusion ended FY25 with a Capital Adequacy Ratio (CAR) of 22.42 percent, which is expected to exceed 30 percent, after the Rs 800 crore rights issue that was subscribed 1.5 times. The issue involved over 6.1 crore partly paid shares at Rs 131 each, with Rs 65.50 paid upfront,” he said.
Asset quality, lending approach
Fusion acknowledged that its older loan book continues to weigh on collection efficiency, but new disbursements are showing robust performance, with new book collection efficiency reaching 99.67 percent in March 2025.
“Guardrails are stricter in risk-sensitive geographies like Odisha and Tamil Nadu,” said the CEO, Sanjay Garyali, adding that Fusion is consciously pulling back from aggressive growth in these areas. The company is also working closely with banks and regulators in high-risk states to avoid confusion with unregulated lenders.
FY26 guidance and outlook
For FY26, the company is prioritising stabilisation and portfolio quality over aggressive growth. Disbursements in Q1FY26 are expected to remain steady at Q4FY25 levels of around Rs 1,100 crore, with a gradual increase expected thereafter. Fusion aims for 50 percent of its loan book to consist of new book assets by September 2025.
The company sees significant growth potential in the MSME segment and plans to focus on profitability and operational strength before re-engaging with rating agencies for a potential outlook revision.
Geography-specific strategy
Fusion has placed states such as Odisha and Tamil Nadu in a “reduce” category due to sectoral overheating and political risks. In these states, the company has restricted product offerings and applied stricter internal risk limits.
The company is closely monitoring May 2025 collection trends in Tamil Nadu, following local developments. “Minor dips have been observed, but they are not yet a cause for concern,” said the CEO.
Financial performance
Fusion’s total income declined slightly to Rs 2,368.89 crore from Rs 2,412.42 crore in FY24, while pre-provision operating profit (PPOP) dropped 28 percent to Rs 736.48 crore. Net interest income (NII) remained stable at Rs 1,285.12 crore, though the net interest margin (NIM) contracted to 10.21 percent from 11.22 percent.
Q4FY25 showed sequential improvement, with net loss narrowing to Rs 164.56 crore from Rs 719.32 crore in Q3FY25. NII rose 20 percent quarter on quarter to Rs 267.93 crore, and PPOP improved to Rs 90.12 crore from Rs 64.77 crore. Credit cost declined significantly to Rs 253 crore from Rs 571 crore, aided by higher provision coverage and Rs 405.20 crore in accelerated write-offs.
Fusion’s gross NPA ratio improved to 7.92 percent in Q4FY25 from 12.58 percent in Q3FY25, although it remains significantly higher than the 2.89 percent level a year earlier. The net NPA dropped to 0.3 percent, and Stage 3 provision coverage rose to 96.53 percent.
However, the company’s ECL provisions surged to Rs 886.93 crore in Q4, compared to Rs 354.54 crore a year earlier. Assets under management (AUM) fell nearly 22 percent year on year to Rs 8,979.92 crore, and the active borrower base declined 17 percent to 32.1 lakh.
Cost pressures increased, with the cost-to-income ratio rising to 51.71 percent from 36.60 percent, and operating expenses to average AUM increasing to 7.71 percent from 5.71 percent.
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