Regarding Fusion's announced Rights Issue, the comapny has received approval from BSE/NSE and is now awaiting SEBI's clearance. SEBI has raised a few queries, but the company expects to receive approval soon. The Rights Issue is pending final regulatory approval.
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Motilal Oswal Report
The macroeconomic environment has intensified asset quality stress in the MFI sector in Q3 FY25. While we are closely monitoring the situation, we believe that the situation is not merely transitory and that recovery is still distant.
Over-leveraging of customer cohorts typically manifests itself in asset quality stress over longer periods. We expect it will take another two quarters for Fusion Microfinance Ltd. to resume loan growth and stabilize elevated credit costs at relatively lower levels (than what they are today).
Fusion, in our view, can deliver an AUM CAGR of ~3% and PAT CAGR of ~-11% over FY24-FY27E.
We estimate an RoA/RoE of ~3.2%/15% in FY27. We reiterate our Neutral rating on the stock with a revised target price of Rs 175 (based on 0.9x Sep'26E price/book value).
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