Fusion Finance Has CLSA Cautiously Optimistic On Future Growth — Here's Why
Fusion Finance's management, including newly appointed CEO Sanjay Galli, has indicated that better clarity on full-year growth will be provided only after the Q1 FY26 results.
CLSA maintained its 'underperform' rating on Fusion Finance Ltd., citing cautious optimism from the company's management regarding future growth. The brokerage's research note highlighted several key aspects of Fusion Finance's performance and outlook.
The firm's management, including newly appointed Chief Executive Officer Sanjay Galli, has indicated that better clarity on full-year growth will be provided only after the Q1 FY26 results. "Management expects Q1 FY26 disbursal trend to be similar to Q4 FY25," CLSA noted.
The company has classified states into three categories: hold, growth, and reduce. Among large states, it is slowing down in Odisha, Gujarat, and Rajasthan, while seeing healthy improvement in Uttar Pradesh and Bihar. "Even in Andhra Pradesh, Telangana, West Bengal, and Assam, management sees good opportunities," the note added.
The research highlighted that Fusion Finance's net slippage in the last two quarters has been 13-14% (annualised), slightly higher than CA Grameen's 11%. "However, write-offs were three times that of CA Grameen," CLSA pointed out. The brokerage has built a 7% Asset Under Management growth and a 6% credit cost for FY26CL. "Successful rights issue gives comfort on the name," CLSA said, maintaining an unchanged target price of Rs 155.
As of March 2025, 18% of Fusion Finance's customers had more than three lenders. However, management indicated that this figure has now reduced to 13% for the current book.
For new disbursements, customers with zero to one lender make up about 70-75% of the mix. With 7.9% of assets under management in stage 3 and a Provision Coverage Ratio of 96.5%, the impact on FY26 credit costs from this pool is expected to be limited.
