Warburg Pincus-backed microfinance company Fusion Finance achieved a net profit of ₹62.4 crore in the first quarter of the fiscal year, marking a significant turnaround from the net loss of ₹92.3 crore recorded in the corresponding period last year. According to reports from The Economic Times, this profitability milestone represents the company's first quarterly profit after seven consecutive quarters of losses. The Gurugram-based lender had previously reported a net profit of ₹114 crore in the fourth quarter of the previous fiscal year. As per The Hindu BusinessLine, the profitability in the Q1 of last year was impacted by impairment charges of ₹179 crore, making the current performance even more impressive. In Q1, the company registered a write back of ₹21 crore from provision made for doubtful loans, with similar amounts of ₹20 crore and ₹18 crore in the previous two quarters.
Fusion Finance is implementing a comprehensive diversification strategy to reduce its dependence on microfinance and build a more diversified lending portfolio. The company currently derives around 88% of its portfolio from microfinance, while MSME loans account for about 12% of AUM. Over the next 2.5 years, Fusion expects the MFI share to decline to about 70% with MSME contributing nearly 20% and individual loans accounting for the remaining 10%. The company plans to launch its individual loan product from September 2026, subject to the rollout plan, comprising unsecured, non-joint liability group (JLG) loans primarily targeting customers with annual incomes above ₹3 lakh. The average ticket size is expected to be ₹1.25-1.5 lakh, with a maximum loan size of ₹2 lakh.
The company's net interest margin expanded to 12% compared to 10% in the corresponding period last year, aided by a lower cost of funds and improving portfolio quality. According to The Hindu BusinessLine, the company's pre-provisioning operating profit for the first quarter stood at ₹102 crore, representing an 18% increase from the ₹85 crore recorded in the year-ago period. These enhanced financial metrics reflect the company's operational efficiency and asset management capabilities, positioning it for sustained growth in the microfinance sector. The company remains confident of achieving its ₹10,000 crore AUM target in FY27, supported by tighter underwriting, improved collection efficiency and technology-led productivity gains.
Asset quality showed marked improvement across multiple metrics, with the gross non-performing assets ratio declining to 2.51% from 3.21% year-on-year, while the credit cost declined to ₹40 crore, marking the seventh consecutive quarter of reduction. As reported by The Hindu BusinessLine, this substantial reduction in non-performing assets demonstrates the company's effective risk management and collection strategies. The improved asset quality contributed significantly to the overall profitability turnaround and validates the company's disciplined approach to underwriting and risk management. For FY27, Fusion has identified four key operating and financial priorities: achieving a 4% return on assets (ROA) by the fourth quarter, bringing credit costs down to 2%, maintaining collection efficiency at 99.75% and reaching ₹10,000 crore in AUM.
CEO Sanjay Garyali emphasized that the simultaneous improvement in profitability, asset quality and growth validates the disciplined approach to underwriting, risk management and execution. The diversification strategy is centred around three customer segments: customers earning below ₹3 lakh will continue to be served through the MFI business, those earning above ₹3 lakh can be addressed through secured and unsecured individual products, while the third segment comprises MSME borrowers where lending is currently entirely secured. The company continues its digital transformation journey with the beginning of an enterprise-wide rollout of its Loan Management System in a phased manner, alongside deployment of AI-enabled capabilities aimed at strengthening compliance, lowering cost-to-serve, reducing operational fraud and enabling fully digital customer onboarding. The capital adequacy ratio remains strong at 37% with liquidity of ₹1,880 crore, providing a solid foundation for continued growth and operational stability.
