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Motilal Oswal Report
We attended the analyst meet held by Fusion Micro Finance Ltd., where the company highlighted the capabilities that it has built across its MFI and MSME verticals, treasury and finance, risk management, information technology, and internal audit. Instead of focusing on steep guidance/targets, the management focused on its aim of building a granular and robust balance sheet that can withstand any external stress events.
The management guided for an assets under management compound annual growth rate in mid-20s, which will come from 10-12% customer additions and 15-20% branch additions.
Over the next two-three years, the management targets to increase the management overlay to 1.0%-1-25% (from ~0.6% now). In good years, it aims to strengthen the balance sheet through a management overlay to keep RoA in the range of 4.7%-4.9% and RoE around 18-20%.
Fusion will focus on diversifying its liability franchise by reducing its dependence on bank term loans and replacing them predominantly with debt capital market instruments and external commercial borrowings (ECB). It will also explore opportunities in social/ESG/impact loans outside India.
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