Fusion Finance Limited is a financial institution with a stated social vision to provide economic opportunities to underprivileged women, enabling them to improve their quality of life. Established in 2010, the company has grown significantly, expanding its operations across 22 states and building a network of over 1,500 branches, primarily serving rural and semi-urban populations. While its core business is microfinance (MFI) targeted at women, Fusion diversified its portfolio in 2019 to include loans for Micro, Small, and Medium Enterprises (MSME), aiming to leverage its distribution network to channel a broader range of financial products.

The company has navigated several key milestones, including achieving an Assets Under Management (AUM) of over ₹1,000 Cr by 2017, crossing the ₹10,000 Cr AUM mark in 2024, and successfully launching its Initial Public Offering (IPO) in 2022. Following a period of financial stress, the company underwent a significant turnaround, marked by a rights issue in 2025 and a name change from Fusion Micro Finance Limited to Fusion Finance Limited. This reflects a strategic pivot towards a more diversified lending model. With over 2.3 million active clients, a strong focus on technology-driven operations, and a robust governance framework, Fusion is positioning itself as a key player in India's financial inclusion landscape.

Official Website: http://www.fusionfin.com/

• Profitability Turnaround: The company has achieved a significant financial turnaround, reporting a Profit After Tax (PAT) of ₹14 Cr for Q3 FY26. This is a substantial improvement from the ₹719 Cr loss recorded in the same quarter of the previous year (Q3 FY25). This restoration of profitability signals a recovery in asset quality and operational health.

• Income and Expenses: Total income for Q3 FY26 stood at ₹424 Cr, a 12% decrease year-over-year (YoY). However, profitability was driven by major reductions in key expense items. Finance costs decreased by 42% YoY to ₹123 Cr, and impairment costs on financial instruments saw a sharp decline of 86% YoY to ₹79 Cr. Pre-Provision Operating Profit (PPOP) grew by a strong 44% YoY to ₹94 Cr.

• Balance Sheet Strength: The company's financial position has been significantly bolstered. Net worth increased by 29% YoY to ₹2,331 Cr as of December 2025. The Capital to Risk-Weighted Assets Ratio (CRAR) is exceptionally strong at 38.80%, well above the regulatory requirement, indicating a robust capital buffer. The liquidity position is also healthy, with cash and bank balances of ₹1,742 Cr.

• Asset Quality Improvement: There has been a dramatic improvement in asset quality metrics. Gross Non-Performing Assets (GNPA) have declined to 4.38% in Q3 FY26 from a high of 12.58% in Q3 FY25. Similarly, Net Non-Performing Assets (NNPA) improved to 0.63% from 1.71% over the same period.

• Credit Costs: Credit costs, a key indicator of asset quality stress, have moderated significantly. Provisions as a percentage of the average loan portfolio stood at 1.3% for Q3 FY26, a sharp fall from 5.8% in Q3 FY25. This trend of declining credit costs for five consecutive quarters underscores the improvement in the underlying loan book.

The company has executed a strong financial turnaround in Q3 FY26, marked by restored profitability, a fortified balance sheet with high capital adequacy, and a significant improvement in asset quality.

• Dual Business Model: Fusion operates a hybrid model combining a traditional microfinance (MFI) business focused on empowering women in rural areas with a growing, secured loan book for Micro, Small, and Medium Enterprises (MSME). This diversification allows it to serve different customer segments and mitigate concentration risk.

• Extensive Rural Focus: The company has a deep and wide distribution network, with 94% of its presence in rural India. This focus on underserved markets provides a distinct operational advantage and aligns with its mission of financial inclusion.

• Technology-Driven Operations: Fusion is actively integrating technology to enhance efficiency and control. This includes a fully digital customer onboarding process (Q-sign), AI/ML-based credit decisioning, geo-fencing for monitoring field operations, and an omni-channel platform for collections.

• Robust Risk Management Framework: The company employs a multi-layered risk governance structure. This includes a Board-level Risk Management Committee, a Management Risk Committee, and three lines of defense (Line Management, Risk Department, Internal Audit) to ensure comprehensive oversight of credit, operational, and other risks.

• Prudent Liability Management: Fusion maintains a well-diversified liability profile, sourcing funds from public sector banks, private banks, foreign banks, and financial institutions. It has a stable average cost of borrowing (10.3% in 9M FY26) and maintains a positive asset-liability management (ALM) position, ensuring liquidity.

Fusion's business model is distinguished by its dual focus on MFI and secured MSME lending, deep rural penetration, increasing adoption of technology, and a structured approach to risk and liability management.

• Calibrated Disbursement Growth: After a period of consolidation, the company is resuming growth in a measured manner. Disbursements in Q3 FY26 increased to ₹1,594 Cr, up 23% quarter-on-quarter (QoQ) and 37% YoY.

• Focus on Quality Sourcing: Growth is being driven by a clear strategy of lending to higher-quality, less-leveraged customers. Disbursements to clients with two or fewer existing MFI loans remain stable at 80% of the total, indicating disciplined lending. The approval rate for new loans has increased from 13.9% to 25.1% over the last two quarters, suggesting a focus on better credit profiles.

• Geographic Growth Drivers: Key states are showing strong disbursement momentum. In Q3 FY26, disbursements in Uttar Pradesh grew 40% YoY, while Bihar and Odisha saw substantial growth of 135% and 157% YoY, respectively.

• MSME Segment Expansion: The MSME business represents a significant growth vector. It has an AUM of ₹729 Cr, with a 95% secured book and operations across 91 branches in 8 states. This segment provides diversification from the core MFI business.

• Shift to Existing Customers: The company is increasingly leveraging its relationship with its existing customer base. Disbursements to existing clients constituted 76% of the total in Q3 FY26, up from 54% in FY24, indicating a strategy focused on deepening relationships with proven borrowers.

The company has returned to a path of calibrated growth, driven by increased disbursements to higher-quality borrowers in key geographies and the expansion of its secured MSME loan portfolio.

• Net Interest Margin (NIM) Expansion: The company's NIM has shown significant improvement, expanding to 11.32% in Q3 FY26. This is a substantial increase of 246 basis points (bps) from 8.86% in Q3 FY25, driven by better yields and stable funding costs.

• Improving Portfolio Yield: The yield on the loan portfolio has increased to 21.6% in Q3 FY26, up from 19.1% in the same quarter last year. This reflects better pricing and an improved product mix.

• Stable Cost of Borrowing: Despite a challenging interest rate environment, the average cost of borrowing has remained stable at 10.3% for the nine months ended December 2025. This stability has been a key contributor to margin expansion.

• Enhanced Operational Efficiency: The Cost-to-Income ratio has improved, declining to 68.9% in Q3 FY26 from 75.9% in Q3 FY25. This indicates better control over operating expenses relative to income.

Fusion has successfully expanded its margins through a combination of higher portfolio yields, stable funding costs, and improved operational efficiency.

• Asset Quality Risk Mitigation: While historically high Non-Performing Assets (NPAs) were a significant concern, the company has actively addressed this risk. The sharp reduction in GNPA to 4.38% and NNPA to 0.63% demonstrates successful risk management and recovery efforts. The net flow of current loans to overdue status has been curtailed to just 0.25% in Q3 FY26.

• Borrower Over-Indebtedness: To mitigate the risk of lending to over-leveraged clients, the company has strategically shifted its portfolio. The percentage of its customer base having loans from three or more other lenders has been reduced from 31.5% in FY24 to 9.9% as of December 2025.

• Collections and Operational Risk: Collection efficiency is a critical operational parameter. The company has shown sustained improvement, with current Collection Efficiency (CE) reaching 99.14%. Operational risks are further mitigated by strengthening fraud monitoring at the branch level and implementing technology like real-time ID validation and geo-fencing.

• Governance and Compliance: The company reinforces its governance framework through a strong, independent board and a dedicated process and quality vertical. It scored 96% on the Code of Conduct Assessment for MFIs, reflecting strong client protection and governance practices.

The company is actively mitigating key credit and operational risks through disciplined lending, improved collection processes, technological integration, and a strong governance framework.

• Leadership and Governance Strengthened: The company has made key leadership appointments to bolster its governance and strategic execution. This includes bringing on Mr. Krishan Gopal as the new Chief Financial Officer and Mr. Brahmanand, an MSME veteran, as an Independent Director to guide the expansion of the MSME business.

• Successful Capital Raise and Restored Status: In Q3 FY26, Fusion raised a total of ₹2,522 Cr through a combination of borrowings and a rights issue. This infusion has significantly strengthened the balance sheet and restored the company's 'going-concern' status, reflecting renewed confidence from lenders and investors.

• ESG and Corporate Social Responsibility: Fusion demonstrates a strong commitment to Environmental, Social, and Governance (ESG) principles. The company has implemented 18 CSR programs, touching over 50,000 lives across 22 states, with initiatives focused on health, education, and environmental sustainability.

• Technological Advancements: The company is undergoing a field tech transformation aimed at boosting productivity and credit discipline. Key initiatives in progress include AI/ML-driven credit operations, an omni-channel collections platform, and enhanced digital loan information and signing processes to reduce fraud and improve efficiency.

Recent updates highlight a focus on strengthening leadership, fortifying the balance sheet through successful capital raising, and advancing technological capabilities to drive future performance.