Fusion Finance targets 20-25% AUM growth as loan demand picks up in H2FY27 | Finance News
Non-Banking Financial Company – Microfinance Institution (NBFC-MFI) Fusion Finance is expecting demand for microfinance and loans to micro, small and medium enterprises (MSMEs) to recover in the second half of FY27, with festival activities picking up across its markets after Navratri and growth returning in October.
However, weather-related disruption during the September quarter could lead to some moderation in its earlier target of assets under management (AUM) of ~10,000 crore by the end of FY27.
The lender expects to deliver an annual AUM growth rate 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 was pushed back in some 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. 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 compounded annually,” said Sanjay Garyali, managing director and chief executive officer.
The lender reported profits of ~86.5 crore in the September quarter against a loss of ~22 crore in the year-ago period, supported by lower credit costs and borrowing expenses.
Excessive rain and floods affected customer accessibility across 140-150 branches in five states during the quarter.
As a result, the lender’s teams prioritised collection and engagement with existing borrowers over fresh disbursements, while customers deferred business investment amid uncertainty over their incomes.
“We are confident that the growth we have seen in the last two months will continue for the rest of the year,” Garyali said.
On asset quality, the lender has put in place separate credit guardrails for markets vulnerable to weather-related disruption, 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 the net interest margin (NIM) 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 increases in lending rates.
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 ~3 lakh threshold.
The lender is planning to use its 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.
