Fusion Finance Limited — Q3 FY26 earnings call

First, starting with the DTA, the overall quantum of DTA is close to about between INR 380 crore to INR 400 crore. You understand that DTA is not necessarily an operating profit. So, we are not very pushy about when to claim that DTA. We will let it happen in the due course. I'm not pushing whether we will do it in Q4 or next year or we will do it in a staggered manner, and we are also not focusing on it. But just to give you a quantum, that's close to about between INR 380 crore to INR 400 crore.

Analyst sought clarity on recognizing a significant DTA for balance sheet optics, but management indicated they would not force the recognition in Q4, preferring it to happen naturally.

Asked by Viral Shah

On the collection efficiencies, the figure that you see in the executive summary is 99.14%, which is at a POS level. This is average for Q3 FY26. What you see is 99.41% for the month of December, that's like quarter ending. The difference between the previous and now on collection efficiency, what we have done is we have put it on pause because that is a meaningful way, that's how the market does it. However, in the annexure, we have also put numbers in case you want to refer to the previous. That's the difference between the two.

Clarified the difference in reported collection efficiency figures, attributing it to reporting methodology (average vs. month-end) and providing context for previous numbers.

Asked by Viral Shah

I'll just partially answer your first question, and the financial aspect of it I'll leave to Krishan. Let's say, we end this year at about INR 7,200 crore to INR 7,300 crore, and you're looking at it, let's say, from INR 7,000 crore to INR 10,200 crore, that's close to about 40% growth. But I'm saying we should not look at it like that because this is something that the current infrastructure anyway supports. So, if you look at our customer base of over 25 lakh customers, 1,600 branches, and 1,450 MFI branches. Technically, we should be just MFI. We should be about INR 12,000 crore of AUM, just MFI.

Addressed concerns about funding an ambitious AUM target by explaining it's primarily leveraging existing, underutilized infrastructure and not requiring significant new investment.

Asked by Rajiv Mehta

On the credit cost, irrespective of management overlay reversal, there is an improvement, and that should continue. As far as utilization of that management overlay is concerned, it is based on the improved flow rates and asset quality. So, as we have communicated earlier, there is a plan to utilize some bit of it every quarter. However, every quarter, we take an assessment of this, and we'll take a call. Our stand is that we should utilize this over the next 1 or 2 quarters gradually, the way we have utilized in the last 2 quarters.

Clarified the strategy for utilizing the management overlay, linking it to ongoing improvements in asset quality and flow rates, with a plan for gradual utilization over the next 1-2 quarters.

Asked by Viral Shah

Let's break this down. Where is the growth coming from? One, we are saying that the MSME book will almost double. Currently, INR 720 crore will go to INR 1,500 crore. Yes. The risk is much less. Why is lesser? Because it is completely secured. The LTVs are far protected. Our book LTVs are close to 55%. We are very, very clear on what kind of properties and what kind of risk we will take. We are not taking any cash flow risk there. The only risk that we are taking is in marketable properties. Let's say, INR 700 crore to INR 1,500 crore will be a far less risky book.

Management detailed the composition of the growth, emphasizing that a significant portion comes from the less risky, secured MSME segment and leveraging existing MFI infrastructure, mitigating perceived aggressiveness.

Asked by Sonal Minhas

On the lending rates, you're right. I think most of the industry has increased lending rates by 100 to 125 basis points. We have not increased lending rates in the last one quarter. We are evaluating the situation, and the pricing committee has clearly put about 75 to 100 bps, which is a window available for us to increase. The decision is on the table, not taken yet. But there is a play of about 75 to 100 bps on the interest rate, which is available to us if we compare it against whatever the industry or the market is. When do we do this? We are evaluating this. I think there are 1 or 2 more external things that we are looking at, basis which we will eventually take a call. But yes, we will take a call by the end of this quarter.

Management confirmed they are evaluating a lending rate increase of 75-100 bps, aligning with industry trends, with a decision expected by the end of the quarter, which could impact NIM.

Asked by Abhijit

On the JLG, I think the group never had a liability. However, if you look at it, there was a nudge by the rest of the lenders, and they would support her. Any one person in the group, he would support her. I think the thing that we are observing is that, depending upon how we acquire the group, the group will stay together versus not stay together. So, let's say, the centre members, how close are they to each other from where the centre meeting is happening? We have kept a certain distance less than a particular distance from the centre meeting.

Management provided detailed insights into their approach to JLG, acknowledging its complexity and the role of acquisition methods and technology in maintaining group cohesion, rather than relying solely on joint liability.

Asked by Abhijit