Fusion Microfinance to make additional provisioning of up to Rs 550 crore

Fusion Microfinance to make ECL provisioning of up to Rs 550 crore in Q2FY25

Fusion Microfinance on September 22 said that it will make estimated credit loss (ECL) provisioning of up to Rs 550 crore in Q2FY25. In an exchange filing, the company said that after conducting an internal audit of the credit book, it has decided to make ECL provisioning between Rs 500 crore and Rs 550 crore in Q2FY25 as compared to Rs 348 crore provision in Q1FY25.

“The Audit Committee of the Company was briefed by the management on an internal review of the credit quality of the loan portfolio in Q2 FY25 and the associated provision that may be required for its current loan book. In this regard, the management briefed the Audit Committee that based on trends thus far, in management’s considered view, it is likely that the Company may be required to make an ECL provisioning between Rs 500 crore to Rs 550 crore in Q2FY25 as compared to Rs 348 crore provision in Q1FY25,” the company said.

The estimated credit loss provisioning, the lender said, may undergo revisions upon finalisation of the Q2FY25 results, including pursuant to the limited review by the statutory auditors.

In Q1FY25, the lender had reported a net loss of Rs 36 crore for the quarter ended June, as compared to a profit of Rs 120 crore in the corresponding quarter last year. “Since the release of the Q1 FY25 results, the management of the Company has been focused on tracking the evolving credit behaviour of its borrowers,” Fusion Microfinance said.

The company, while announcing its Q1FY25 results earlier had shared that around 24 percent of its borrowers (as of Mar’24) have MFI loans from five or more lenders and that the stress currently being seen in the sector is predominantly because of customer over-leveraging, weak center meeting attendance, customer migrations and field attrition.

In a different notification to the exchanges, the lender also announced the change in designation of Tarun Mehndiratta from Chief Operating Officer for the Microfinance Business to Head Customer Loyalty Program & New Initiatives. It also appointed Sunil Mundra as Chief Operating Officer for the Microfinance Business’ of the company.

Fusion Microfinance also announced that Devesh Sachdev, MD and CEO, will step down from the post and be appointed as the chairman of the company. As part of the plan to strengthen the executive leadership team, the company will kick off search for a suitable CEO candidate. Sachdev, as the founder of Fusion Microfinance, will continue as MD before assuming the role of Chairman of the Board.

“Devesh Sachdev, MD and CEO of the Company, briefed the board that given the increased macro complexity and changing landscape of the sector, it is the right time to strengthen the executive leadership team of the Company. The Board supported the plan presented by Sachdev,” Fusion Microfinance said.

The Nomination and Remuneration Committee of the company will initiate a search process for selecting a suitable candidate for the position of the CEO. The Board expects this to be done within the next few months.

"It is proposed that Sachdev remain in his role as MD for a period of time and then be appointed as the Chairman of the Board,” the company said.