Fusion Finance targets Rs 10000 cr AUM by March 2027 after completing Rs 800 cr rights issue

MUMBAI: Fusion Finance has closed its Rs 800 crore rights issue after investors paid the final instalment on partly-paid shares on Dec 11, marking a return to growth after stress in the microfinance portfolio shrank AUM from a peak of Rs 12,000 crore to Rs 7,000 crore. Promoters Creation Investments and Warburg Pincus infused more capital to retain their stakes, helping the Rs 799.86 crore issue—launched in Apr 2025 at Rs 131 a share—finish fully subscribed. The last tranche of Rs 65.50 per share, including the Rs 5 face-value component, was due in the final call window. The stock now trades at Rs 157.

MD & CEO Sanjay Garyali said the capital raise strengthens Fusion’s ability to scale both its microfinance and secured MSME books. Capital adequacy now exceeds 31% before accounting for final call receipts. Fusion aims to expand its microfinance book from about Rs 6,300 crore to nearly Rs 9,000 crore in the next 14–16 months and double its MSME book to Rs 1,400 crore. By Mar 2027, Garyali expects AUM to cross Rs 10,000 crore. He added that the current network—22 states, 1,500 microfinance branches and 91 MSME branches—can support Rs 13,000–14,000 crore in microfinance AUM and Rs 1,700–1,800 crore in MSME AUM without significant expansion.

Garyali said the microfinance sector’s recent stress stemmed from over-borrowing and inflation-hit incomes. Borrowers who slipped with one lender were still able to borrow elsewhere, masking deterioration. Fusion tightened its credit filters early through an aggressive write-off policy, lower exposure limits, a ban on lending to delinquent customers and caps on the number of lenders serving each borrower. Collection efficiency has since recovered to more than 99%. Disbursements have also picked up, rising from Rs 900 crore in Q1 to Rs 1,300 crore in Q2.

The MSME portfolio, now around 10% of the book, is seeing stronger demand in northern and western markets. Fusion lends only against self-occupied residential or commercial property, mainly to small shopkeepers, with ticket sizes of Rs 5–25 lakh. Garyali expects credit costs to fall below 1.5% as the book seasons. RBI rules now allow NBFC-MFIs to build secured MSME portfolios up to 40% of their books, which he described as a major opportunity. Fusion plans to scale this business within its current licence rather than seek a small finance bank permit.

Technology upgrades are improving operating efficiency. Fusion has adopted paperless onboarding and fully digital receipting, raising productivity by 40–50%. A new system due by year-end will allow staff to handle nearly double the business without a higher headcount. Bank funding remained steady through the sector downturn at Rs 1,200–1,500 crore a quarter. Most of Fusion’s Rs 5,000 crore debt is from PSU, private and foreign banks. Garyali said regulation has been broadly supportive and expects further gains in customer service and grievance handling.

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