Detailed Narrative
Return to Profitability and Strengthened Financials
Fusion Finance achieved profitability in Q3 FY26 with a PAT of INR 14 crore, marking its third consecutive period of improvement. This turnaround was supported by broad-based enhancements in asset quality, collections, and credit cost management. Importantly, the company's auditors have confirmed that the earlier emphasis relating to 'going concern' is no longer relevant, reflecting the business's strengthened stability and resilience.
Robust Disbursement Growth and Asset Quality Improvement
Q3 FY26 disbursements grew to INR 1,594 crore, a 22.8% increase from the previous quarter's INR 1,298 crore. This growth was driven by reduced operational friction and leveraging a preapproved client base, which now contributes 30% of new disbursements with a 50% approval rate. Asset quality metrics showed significant improvement, with Gross NPA declining to 4.38% and Net NPA contained at 0.60%, demonstrating effective portfolio hygiene.
Enhanced Collection Efficiency and Credit Cost Outlook
The company reported a strong current bucket collection efficiency of 99.4% in December, with 99.7% for the new book, which constitutes 80% of the portfolio. Discipline in centre meetings led to 94% of collections realized on the same day. The net flow forward rate in the current bucket stood at 0.25%, giving confidence that stable state credit costs are expected to normalize in the range of 3.25% to 3.75%.
Capital Adequacy and Funding Profile
Fusion Finance maintains a robust capital position with a capital adequacy ratio of 38.8% and comfortable liquidity of INR 1,783 crore as of December. The company also has INR 1,825 crore in sanctions available for drawal at any point. During Q3, INR 2,127 crore in debt was raised, bringing the 9M FY26 total to INR 3,940 crore, diversifying its funding profile and strengthening lender confidence, with waiver coverage for covenant-related matters improving to 97%.
Strategic Growth in MSME and MFI Segments
The company is targeting an AUM of INR 10,000 crore by FY27, with the MSME portfolio expected to almost double from INR 720 crore to INR 1,500 crore, constituting 15% of the total AUM. This MSME growth is considered less risky due to secured lending and low LTVs of approximately 55%. MFI growth is projected from INR 6,400-6,500 crore to INR 8,600 crore, primarily by utilizing existing infrastructure rather than aggressive expansion.
Technology Upgrades and Operational Efficiency
Work on enhanced LMS and LOS platforms is complete, with User Acceptance Testing (UAT) expected to begin soon and phased implementation by May 2026. These upgrades aim to modernize processes, improve front-end execution, and provide real-time operational visibility. The cost-to-income ratio for the quarter was 69%, with operating costs remaining nearly flat QoQ, reflecting a focus on cost discipline and productivity improvements.
Recovery Efforts and Management Overlay
The company is averaging over INR 12 crore per month in 60-plus DPD recoveries and is targeting INR 50 crore in quarterly recoveries, with a goal of INR 200 crore over the next four quarters from the INR 3,000 crore write-off pool. A management overlay of INR 15 crore was released this quarter, and the remaining overlay is planned to be utilized gradually over the next 1-2 quarters based on improved asset quality and flow rates.