Fusion Finance targets 20-25% AUM growth as loan demand picks up in H2FY27. MD Sanjay Garyali said, "We are now seeing growth returning in October." While weather issues slowed the September quarter, the lender expects festive activity to boost business. They remain focused on MSME loans and cutting operating expenses.
Sanjay Garyali, MD & CEO, Fusion Finance | Image: Company's Website
Fusion Finance expects demand for microfinance and micro, small and medium enterprise (MSME) loans to recover in the second half of FY27, with festive activity picking up across its markets after Navratri and growth returning in October. However, weather-related disruptions during the September quarter could lead to some moderation in its earlier assets under management (AUM) target of Rs 10,000 crore by the end of FY27.
The lender expects to deliver annual AUM growth of 20-25 per cent over a three-year period, supported by its focus on premium joint liability group (JLG) loans and secured MSME lending.
"Demand got postponed in some of the markets during this quarter. So, there could be a little moderation on the (AUM) figure that we had given. But we are now seeing growth returning in October. It is already on the growth side. We have already given a figure, so we don't want to give another one. But directionally, we will continue to remove non-productive operating expenses, and credit costs will remain within our guidance of 2-2.5 per cent. In the medium term, we can safely assume that we will deliver 20-25 per cent AUM growth on a CAGR basis," said Sanjay Garyali, MD & CEO, Fusion Finance.
The lender reported a profit of Rs 86.5 crore in the September quarter, against a loss of Rs 22 crore in the year-ago period, supported by lower credit costs and borrowing expenses.
Excessive rainfall and floods affected customer accessibility across 140-150 branches in five states during the quarter. As a result, the lender's teams prioritised collections and engagement with existing borrowers over fresh disbursements, while customers deferred business investments amid uncertainty over their incomes.
Kirloskar Industries Q2 profit rises 5% to ₹105 crore, income up 17%
Three investors offload 1.84% stake in Groww for ₹2,457 crore in bulk deals
SoftBank sells 1.56% Lenskart stake for ₹1,896 crore, Goldman biggest buyer
Tata Steel Q2 net profit up 18.2 per cent Y-o-Y, led by India operations
Angan Guha rejoins Wipro as CEO of its Americas 2 unit, effective Dec 8
However, demand has started recovering, with festive activity picking up across the lender's markets after Navratri.
"We see demand holding on the ground and actually see demand picking up already after Navratras. The festive demand has picked up in all our markets. We are quite confident that the growth we have seen in the last two months will continue for the rest of the year," Garyali said.
On the asset quality front, the lender has put in place separate credit guardrails for markets vulnerable to weather-related disruptions, including Karnataka and Maharashtra. In Maharashtra, it has ring-fenced branches through tighter ticket-size limits and measures to retain field employees.
Credit costs have declined from over 5 per cent to around 2 per cent, while incremental borrowing costs have fallen to around 9.4 per cent from 12.5-13 per cent three to four quarters ago.
The lender expects net interest margins (NIMs) to improve by around 20 basis points in Q3 and another 10-15 basis points in Q4, supported by lower borrowing costs and the pass-through of lending rate increases.
Fusion Finance is also looking to diversify its lending mix through an integrated, branch-led model spanning core microfinance, premium JLG and individual lending, and secured MSME loans. While core JLG lending will remain the largest part of its business, premium products will help it serve customers whose annual incomes have risen beyond the Rs 3 lakh threshold.
The lender plans to use its existing network of around 1,550 branches to expand into premium JLG, unsecured loans and loans against property, while improving branch productivity and diversifying earnings without significantly increasing operating expenses. It will continue to maintain disciplined underwriting and independent credit oversight.