Fusion Finance’s losses swell to Rs 719 crore in Q3

Fusion Finance's net interest income at Rs 223 crore was down 44 percent quarter-on-quarter and 34 percent year-on-year

Warburg Pincus-backed Fusion Finance has reported a third consecutive quarter of loss in FY25, as the microfinancier’s loan book continues to shrink.

In an after-market hours announcement on February 12,  the NBFC reported a loss of Rs 719.31 crore for the December quarter against a loss of Rs 305 crore in the previous quarter ago and a profit of Rs 126.45 crore in the year-ago period.

The company’s worsening financial health and rising debt challenge the company’s ability to continue as a going concern, its auditor Deloitte Haskins & Sells has said.

The weak performance came on the back of shrinkage in the loan book and a consequent fall in revenues. The lender’s outstanding loans at Rs 10,599 crore were down 8 percent from the previous quarter and a percent lower from the year-ago period.

Net interest income at Rs 223 crore was down 44 percent quarter-on-quarter and 34 percent year-on-year.

Gross non-performing assets (NPA) rose to Rs 1,192 crore or 12.6 percent from 3 percent a year ago and 9.4 percent in Q2.

Net NPA, however, declined 1.7 percent from 2.4 percent in the previous quarter but was higher than 0.8 percent in the previous year.

Net credit cost reduced from 6.5 percent in Q2 to 5.7 percent, though against a year-ago level of 0.9 percent, the number remains elevated.

According to Fusion Finance’s investor presentation, borrowers of the company with exposure to three or more lenders reduced from 31.5 percent as on March 31, 2024 to 20.6 percent at the end of the December quarter.

Overall collection efficiency was at 97.74 percent as of January 31, 2025.

Auditor’s red flags

Deloitte Haskins & Sells, the lender’s statutory auditor, said in its report that the company’s ability to continue as a going concern may be challenged.

“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 twelve months from the balance sheet; and / or securing sufficient funds through other sources such as (i) successful sale of loans; (ii) rights issue and (iii) refinancing of borrowings,” the report said.

Clause 7 of the company’s notes to accounts for Q3 says the company had breached various financial covenants in respect of borrowings amounting to Rs 5,288 crore as on December 31, 2024, resulting in these borrowings becoming repayable on demand. “The company has obtained an extension, albeit of less than 12 months from the testing date for said breaches from lenders whose borrowings as of December 31, 2024 aggregate Rs 4,145 crore.

“As a result, no demand for immediate repayment is anticipated until the extended date from these lenders. The company is in discussion with the remaining lenders to obtain similar extensions and no demand for immediate repayment of borrowed funds is made by lenders to date,” the note said.

Available cash and cash equivalents and liquid assets totalled Rs 1,151 crore at the end of Q3 against Rs 1,793 crore in Q2. Fusion Finance’s capital adequacy stood at 22.2 percent.

In October, the lender revealed its plans to raise Rs 550 crore. Subsequently, the size was increased to Rs 800 crore. The rights issue is expected by the end of the current fiscal.