Reduce Fusion Finance; target of Rs 160: ICICI Securities

ICICI Securities research report on Fusion Finance

Fusion Finance (Fusion) has bolstered its balance sheet by upping its provision cover across Stage-1/2/3 assets and de-recognising interest income on Stage-3 assets. Yet, PAR 0+ at 19% (one of the highest within MFI space) casts a shadow on near-term profitability. It recovered interest income to the tune of ~INR 1bn in Q3FY25, resulting in total interest income plunging 30% QoQ to INR 4.4bn vs. INR 6.3bn QoQ. Headline asset quality weakness persists as GNPL rose to >10% in Q3FY25. Management plans to strengthen the balance sheet by raising fresh equity worth INR 8bn via a rights issue.

Outlook

However, this is pending for four months; given no clarity on the issue price, we refrain from building in capital infusion at this point. With a likely top management change and an elevated stress pool at 19%, as on Dec’24, we believe profitability normalcy is yet distant. Retain REDUCE; INR 160 TP unchanged, based on 0.6x Sep’25E BVPS.

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