Fusion Finance (FUSION) Q2 24/25 earnings summary

Executive summary

• The microfinance sector faced significant headwinds in Q2 FY25, with uneven stress across geographies impacting asset quality, collections, and operating metrics; corrective actions included stricter credit criteria, enhanced collections, and onboarding new leadership.

• Management remains confident in the temporary nature of covenant breaches and is pursuing a rights issue of up to INR 550 crore to strengthen capital adequacy.

• MSME vertical continues to scale, with AUM reaching INR 620 crore and a secured portfolio mix of 78%.

• Borrower base reached 38.52 lakh, with disbursements for the quarter at INR 1,661 crore and 65 new branches added.

• Despite operational growth, the quarter saw a net loss of INR 305 crore due to elevated provisioning for expected credit losses amid industry-wide delinquency trends.

Financial highlights

• Total income for Q2 FY25 was INR 704 crore, up 23.19% year-over-year; net interest income rose 30.46% to INR 397 crore.

• Credit cost for Q2 FY25 was INR 693 crore, higher than earlier estimates due to accelerated provisioning.

• Pre-provision operating profit for Q2 FY25 was INR 284 crore, up 17.39% year-over-year but down 4.67% sequentially.

• Net loss after tax for Q2 FY25 was INR 305 crore, compared to a profit of INR 126 crore in Q2 FY24.

• Gross NPA increased to 9.41%, with net NPA at 2.41%.

Outlook and guidance

• Management expects improvement in performance from Q3 onwards, with early positive signs in collections and portfolio quality.

• No specific guidance for H2 provided due to ongoing sectoral uncertainty, but collection efficiency is holding steady at 91-92%.

• Rights issue of up to INR 550 crore is expected to further strengthen capital adequacy.

• Focus remains on prudent growth, tightening credit criteria, and strengthening collections.