Fusion Finance: Business Overview & Financial Analysis

Fusion Finance is an NBFC-MFI focused on providing financial services to underserved customers in rural and semi-rural India. The company began operations in 2010 and primarily lends to women entrepreneurs through the Joint Liability Group model. It diversified into secured MSME lending in 2019 and now operates microfinance and MSME lending as its two principal business verticals.

Fusion Finance Business and Distribution Profile (Q1 FY27)

As of 30 June 2026, Fusion Finance had an AUM of Rs 7,702 crore and a nationwide distribution network of 1,512 branches. The network remains predominantly rural, supporting the company's focus on financially underserved customers.

• AUM: Rs 7,702 crore, up around 4% QoQ.
• Active customers: More than 20 lakh.
• Branch network: 1,512 branches.
• Geographic presence: 22 states, 3 Union Territories and 489 districts.
• Presence mix: Around 94% rural and 6% urban.
• Top five states concentration: Around 68%.
• AUM per branch: Rs 5.1 crore, compared with Rs 4.8 crore in Q4 FY26.

The company is rationalising weaker locations while selectively entering markets where borrower quality and growth potential are stronger, rather than expanding the branch network solely for scale.

Fusion Finance Microfinance Portfolio and Borrower Quality (Q1 FY27)

Microfinance remains Fusion Finance's core business and is focused on women borrowers under the JLG model. Following stress across the microfinance industry, management has tightened customer selection and reduced exposure to borrowers carrying multiple MFI relationships.

• Q1 FY27 MFI average ticket size: Around Rs 61,000.
• Fusion-only customers: 37.7% of customers with MFI exposure as of June 2026.
• Fusion + one lender: 33.9%.
• Fusion + two lenders: 21.6%.
• Fusion + three or more lenders: 6.8%, down from 18.1% in March 2025.
• Q1 borrower selection: Around 85% of customers receiving disbursements had only one other lender besides Fusion.
• New-to-Fusion borrowers: 37% of Q1 disbursements, moving closer to 40% in June 2026.
• MFI customer collections: Collection efficiency remained above 99.75%.

The declining share of borrowers with multiple lender relationships reflects management's effort to build a less leveraged portfolio. Future growth remains linked to maintaining this underwriting discipline as disbursements accelerate.

Fusion Finance MSME Business (Q1 FY27)

The MSME vertical provides secured business loans to established small businesses in rural and semi-urban markets. The portfolio includes retailers, wholesalers, manufacturers and service providers, with property-backed lending forming the core product.

• MSME AUM: Rs 796 crore as of 30 June 2026.
• Q1 FY27 disbursements: Rs 98 crore.
• Active MSME customers: More than 19,000.
• MSME branches: 90 across 8 states.
• Average tenor: 74 months.
• Loan-to-value ratio: 42.5%.
• Product: Secured business loans, including collateral-backed loans of up to Rs 25 lakh in focused markets.
• Collection efficiency: More than 99.3%.

Management plans to use selected existing MFI locations to source MSME customers, reducing the need for a completely separate physical distribution network while maintaining independent underwriting and credit processes.

Fusion Finance Q1 FY27 Financial Performance

Q1 FY27 showed continued improvement in core profitability and asset quality. AUM grew sequentially, disbursements increased sharply year-on-year and lower credit costs supported a return to quarterly profitability compared with the loss recorded in Q1 FY26.

• AUM: Rs 7,702 crore, up 4% QoQ and 0.2% YoY.
• Disbursements: Rs 1,783 crore, up 88% YoY but down 17% QoQ.
• Total income: Rs 458 crore, up 7% QoQ and 3% YoY.
• Net interest income: Rs 236 crore, up 6% QoQ but down 12% YoY.
• NIM: 11.93%, up 49 bps QoQ and 164 bps YoY.
• PPOP: Rs 102 crore, up 10% QoQ and 17% YoY.
• Credit cost: Rs 40 crore, down 29% QoQ and 78% YoY.
• PBT: Rs 62 crore compared with Rs 37 crore in Q4 FY26 and a Rs 92 crore loss in Q1 FY26.
• PAT: Rs 62 crore compared with a Rs 92 crore loss in Q1 FY26.
• Net worth: Rs 2,521 crore, up 30% YoY.

The improvement in Q1 FY27 was driven largely by lower credit costs, higher margins and operating leverage. Management expects the next phase of earnings improvement to depend increasingly on AUM growth rather than further normalisation of credit costs alone.

Fusion Finance Asset Quality and Collections (Q1 FY27)

Asset quality continued to improve during Q1 FY27, with GNPA declining for the seventh consecutive quarter. Collection efficiency on the current portfolio remained high, while recoveries from older delinquent and written-off accounts continued.

• GNPA: 2.51%, compared with 3.21% in Q4 FY26 and 5.43% in Q1 FY26.
• NNPA: 0.47%, compared with 0.51% in Q4 FY26.
• Closing ECL: Rs 233 crore compared with Rs 270 crore in Q4 FY26.
• ECL coverage: 3.5% of the gross loan portfolio.
• Stage I loans: Rs 6,426 crore, representing 96.8% of gross loans.
• Stage II loans: Rs 46 crore, or 0.7%.
• Stage III loans: Rs 167 crore, or 2.5%.
• Management overlay: Rs 19.5 crore.
• Bad-debt recoveries: Rs 21 crore during Q1 FY27.
• Current collection efficiency: 99.76% on an all-India basis.

Management has brought hard-bucket collections fully in-house and is combining dedicated collection teams with AI-led customer identification and engagement. Quarterly recoveries from the 60-plus DPD portfolio remained above Rs 35 crore.

Fusion Finance Funding, Liquidity and Capital Position (Q1 FY27)

Fusion Finance maintained a diversified lender base and a sizeable liquidity buffer in Q1 FY27. Capital adequacy remained well above regulatory requirements, providing headroom for the planned expansion in AUM.

• CRAR: 36.95% as of June 2026.
• Debt-to-equity: 2.3x.
• Cash and other bank balances: Rs 1,880 crore.
• Sanctions in hand: Rs 2,302 crore.
• Average cost of borrowing: 10.6%; excluding exchange-rate impact, around 10.3%.
• Marginal cost of borrowing: 10.1%.
• Private-sector banks: 47% of the lender mix.
• Foreign banks: 21%.
• Non-banking financial institutions: 13%.
• Public-sector banks: 11%.

Average liability maturity stood at 24.1 months against an average asset maturity of 17.9 months, providing a positive ALM position. Management also disclosed an additional funding pipeline of around Rs 2,000 crore beyond available sanctions.

Fusion Finance Technology and Operating Model (Q1 FY27)

Technology is increasingly being used across underwriting, collections, onboarding and customer servicing. Management is combining AI-driven analytics with branch-level decision-making to improve productivity and identify credit risks earlier.

• AI customer interactions: More than 6 million interactions during Q1 FY27, reaching over 1.1 million customers.
• Collections: AI is being used for pre-due and overdue reminders and higher-stage collections.
• Credit assessment: AI-supported video personal discussions and income assessment are under pilot.
• Underwriting: Automated risk grading and credit decisioning are being incorporated into lending processes.
• Customer onboarding: Multilingual digital and AI-supported onboarding capabilities are being developed.
• LOS and LMS: Migration to new loan-origination and loan-management platforms had entered the pilot stage.
• Branch risk framework: Portfolio quality and growth decisions are increasingly being managed at individual branch level.

The technology programme is intended to reduce manual intervention, improve underwriting consistency and make collections more scalable as the portfolio resumes growth.

Fusion Finance Management Commentary and Outlook (Q1 FY27)

Management's FY27 strategy centres on rebuilding AUM while maintaining the improved credit profile achieved during FY26 and Q1 FY27. Growth is being calibrated by branch quality, borrower leverage and collection behaviour rather than being driven by portfolio size alone.

• FY27 AUM objective: Management remains focused on reaching around Rs 10,000 crore by FY27-end.
• Return profile: Management is targeting an exit ROA of around 4% by the end of FY27.
• Credit cost: Q1 credit cost was consistent with management's annualised expectation of around 2%.
• MFI network: Around 50 new branches are planned while approximately 100 existing branches are expected to be rationalised by Q3 FY27.
• MSME expansion: Around 50 existing MFI locations will initially be used to source secured MSME business.
• Tamil Nadu: The company is entering the state for MSME lending using existing MFI infrastructure with separate credit and underwriting teams.
• Individual loans: Management is gradually introducing individual loans for selected MFI customers, with potential to reach around 10% of MFI disbursements over time.
• Earnings driver: Management expects average AUM growth and operating leverage to become more important contributors to profitability as credit costs normalise.

The key indicators to track are progress towards the Rs 10,000 crore AUM objective, sustained collection efficiency, GNPA movement, credit costs, MFI borrower leverage, MSME growth, branch productivity and the company's ability to convert balance-sheet liquidity into profitable loan growth.

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Sources & References

This company fact sheet has been prepared using Fusion Finance's latest quarterly, management and official exchange disclosures together with financial information available on Finology Ticker.

• Fusion Finance Q1 FY27 Earnings Presentation
• Fusion Finance Q1 FY27 Earnings Conference Call Transcript
• Fusion Finance Q1 FY27 Unaudited Financial Results and Official Stock Exchange Filings
• Finology Ticker – Fusion Finance Company Page

Disclaimer
The information presented above on Fusion Finance has been compiled from the company's Annual Reports, Investor Presentations, Earnings Call (Concall) Transcripts, official regulatory filings and the financial data available on Finology Ticker. Certain figures, classifications or comparisons may vary due to differences in accounting policies, reporting methodologies or subsequent restatements by the company. This content is intended solely for informational purposes and should not be considered as investment advice. Investors are advised to refer to the latest company filings and the updated financial data, ratios and disclosures available on this Finology Ticker Fusion Finance page before making any investment decision. Investment in securities market are subject to market risks. Read all the related documents carefully before investing.