After international brokerage Investec downgraded Fusion Finance, global broking firm CLSA followed suit, downgrading the NBFC to 'underperform' from 'outperform' earlier.
The microfinance player recently disclosed that higher credit costs for the second quarter so far, which indicates that the collection efficiency has not improved over the past two months, after falling towards the end of the first fiscal quarter in FY25.
In an exchange filing, the company said that it will make an estimated credit loss (ECL) provisioning of up to Rs 550 crore in Q2FY25, up from Rs 348 crore provision in Q1FY25. 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.
Additionally, the firm is undergoing multiple changes in its leadership team, as well as operational processes, noted CLSA. The brokerage slashes its target price on Fusion Finance to Rs 260 per share, down from Rs 550 per share earlier.
At 11.25 am, Fusion Finance shares were lower by 8.7 percent on the NSE at Rs 252 per share, extending their losses from the previous session.
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On September 23, Investec downgraded the stock to 'sell' from 'hold' and slashed target price to Rs 300 apiece from Rs 500. Investec analysts said that the profit warning by Fusion Finance signals a "deeper trouble" and this fear may trigger a downward spiral - be it credit downgrade, funding challenges, or loan book decline.
The brokerage firm recommended a quick action on management change and capital raise would be required by the micro-finance lender. They cut FY25/26 PAT estimates by a whopping 102 percent and 22 percent, respectively.
Following the updates, Fusion Finance's stock price crashed over 10 percent to hit 52-week low of Rs 274 per share on September 23.
Over the past year, shares of Fusion Finance have wiped off more than half their value, falling 53 percent in trade. In comparison, the benchmark Nifty 50 index has surged around 31 percent during the same time.
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