Fusion Finance Q3 FY26: PAT ₹14 Cr, NIM 11.3%

Profitability returns after a stressed phase

Fusion Finance said Q3 marked an inflection point as the lender returned to profitability after a period of stress in microfinance. Management reported a profit after tax (PAT) of ₹14 crore for the quarter. The company linked the turnaround to improvement in asset quality, collections, and credit cost, along with “disciplined disbursement growth.” It also said auditors have reviewed its financial position and confirmed that the earlier emphasis relating to “going concern” is no longer relevant.

The commentary comes alongside disclosures on funding, liquidity, and a sharpening strategy around branch-level credit decisioning and a growing secured MSME portfolio. Fusion operates as an NBFC-MFI with a diversified presence in microfinance and MSME lending across rural and semi-urban India.

What changed in Q3, according to management

Management described the quarter as a phase of “control, stabilization and disciplined execution,” and said it was the third consecutive period of improvement in asset quality, collections and credit cost. On operating performance, Fusion reported a pre-provisioning operating profit of ₹94 crore for the quarter. It also recorded a one-time charge of ₹6.91 crore towards the new Labour Code, and said excluding this, pre-PPOP would have been about ₹100 crore.

Net interest margin (NIM) for the quarter stood at 11.3%, which the company attributed to a favourable portfolio mix, improving asset quality, and lower income reversals from stage 3 assets. Fusion also reported a cost-to-income ratio of 69%, with overall operating costs “nearly flat” quarter-on-quarter.

Collections: current bucket efficiency moves above 99%

Collections were a central focus in the update. Fusion said current bucket collection efficiency stood at 99.4% in December and 99.7% for the “new book,” which management said represents 80% of the portfolio. It also said it has tightened ground-level discipline and guardrails.

In the analyst Q&A, management discussed flow-forward dynamics and said it has increased focus on gross collection efficiency, including “center meeting discipline.” It also referred to improvements in flow-forward rates in the 30-to-60 bucket in November and December compared with earlier months.

Disbursements rise, with pre-approved customers a larger share

Fusion said disbursement momentum continued into January and that it has crossed ₹670 crore “between more than 1 lakh customers for the past three months.” Management also highlighted two initiatives behind the uptick: reducing operational friction for front-end teams and leveraging a pre-approved base of higher-quality clients.

It said about 30% of new disbursements now come from the pre-approved base, with approval rates “close to 50%.” The credit framework is increasingly anchored at the branch and district level, and the company said its A and B category branches have lower portfolio stress and better collection efficiency. These branches account for 82% of Fusion’s network and contribute 91% of fresh disbursements.

MSME portfolio: traction in the ₹7–15 lakh segment

Fusion said it is seeing strong traction in the MSME portfolio, particularly in the ₹7 lakh to ₹15 lakh ticket size segment. Separately, the Mumbai report said the MSME portfolio is around 10% of the book and is seeing stronger demand in northern and western markets, with loans backed by self-occupied residential or commercial property and ticket sizes of ₹5 lakh to ₹25 lakh.

Management positioned the secured MSME vertical as a second growth engine and said it has built scalable processes and tools. In the Q&A, Fusion said MSME could be about 15% of a ₹10,000 crore book, implying a meaningful increase from a stated MSME book of about ₹700 crore to ₹720 crore in the discussion.

Credit cost and recoveries: targets and normalization range

Fusion said credit costs in a stable state are expected to normalize in the range of 3.25% to 3.75%. On recoveries, it said its in-house collection team is currently averaging over ₹12 crore per month of 60+ DPD recoveries in cash, with over 85% driven by internal teams.

Management said it is targeting ₹50 crore in quarterly recoveries. In the Q&A, it also described a target of about ₹200 crore of cash collection over the next four quarters from the “60+” pool, and indicated that about 90% of the ₹50 crore quarterly target (around ₹45 crore) would be from 90+ buckets.

Liquidity, sanctions and lender support

Fusion said liquidity remained comfortable at about ₹1,783 crore as of December. It also said it had sanctions in hand of ₹1,825 crore that it can draw at any time. Capital adequacy was reported at 38.8%, which management said provides adequate headroom for regulatory requirements.

During the quarter, the company said it raised ₹2,127 crore, comprising term loans of ₹1,347 crore, direct assignment transactions of ₹434 crore, NCDs of ₹310 crore and PTCs of ₹37 crore. It also said total debt raised in the first nine months till December 25 was ₹3,940 crore.

Management added that it has diversified borrowings across banks, financial institutions and development-focused lenders, reducing concentration risk. It also said that lenders who were earlier in “wait and watch” mode have started to re-engage.

Rights issue update and capital plans

Fusion said the first and final call of its rights issue received ₹390 crore subscription, about 99% of the issue size of ₹400 crore for that call. A separate Mumbai report said Fusion closed its ₹800 crore rights issue after investors paid the final instalment on partly-paid shares on December 11.

In the Q&A, management addressed a question on recognising deferred tax assets (DTA). It said the quantum is close to about ₹380 crore to ₹400 crore, and added it is not pushing for whether it will be recognised in Q4, next year, or in a staggered manner.

Growth guidance, infrastructure and network capacity

Fusion discussed an ambition to rebuild scale after AUM fell from a peak of about ₹12,000 crore to about ₹7,000 crore. In the same context, management spoke about reinstating growth by utilising existing infrastructure rather than a large footprint expansion.

The Mumbai report said Fusion aims to expand its microfinance book from about ₹6,300 crore to nearly ₹9,000 crore in the next 14 to 16 months, and to double its MSME book to ₹1,400 crore. It also quoted management expecting AUM to cross ₹10,000 crore by March 2027. The report added that Fusion’s current network spans 22 states with 1,500 microfinance branches and 91 MSME branches.

Technology: LMS and LOS upgrade timeline

Fusion said most work related to its enhanced LMS and LOS platforms is complete. It expects to begin user acceptance testing (UAT) in the coming weeks, with phased implementation targeted for completion by May.

The company linked technology upgrades to productivity improvements and smoother execution at the branch level, particularly as it seeks to normalise growth while maintaining tighter guardrails.

Key numbers snapshot

Market context and stock reference

The Mumbai report said the stock trades at ₹157. A separate market snapshot in the provided text lists a current price of ₹148 and a market cap of ₹2,393 crore, alongside a 52-week high/low of ₹212/₹124. The same snapshot lists book value at ₹118 and dividend yield at 0%.

Fusion’s recent period included stress in the microfinance portfolio, with one note stating AUM contracted 37% year-on-year to ₹7,688 crore at the end of June from ₹12,193 crore a year ago. Another note said the company reported a ₹92.25 crore net loss in Q1 FY26 and breached covenants on ₹3,567 crore in borrowings, while seeking lender waivers.

Conclusion

Fusion’s Q3 update centred on a return to profitability, improving collections, and a stronger liquidity and funding posture, while reiterating a guarded approach to growth. The company has guided to a 3.25% to 3.75% stable-state credit cost range and set a quarterly recoveries target of ₹50 crore, alongside a technology rollout targeted for completion by May. Management also indicated it will take a decision by the end of the quarter on a potential JLG interest rate increase window of 75 to 100 basis points, as discussed during the call.