Target: ₹170

CMP: ₹198.65

We met with Fusion Finance’s new CEO, Sanjay Garyali (ex-LTFH, Kotak), to understand his business turnaround plan. He indicated that the immediate focus is on managing asset quality and restoring profitability while adopting a disciplined and diversified approach to portfolio growth in the long run.

Considering the easing going concern issues following the capital infusion (of ₹800 crore) by pedigreed investors and the reducing incremental MFI stress flow, we haul up our TP by about 26 per cent to ₹170 from ₹135, valuing Fusion at 1x FY27E ABV. Fusion logged one of the highest shares of borrowers with +3 lenders at 31.5 per cent, which remains elevated at 18% as of Mar-25. Thus, the unwinding could impact growth/asset quality in the near-to-medium term

However, we expect overall credit cost to remain elevated at around 5 per cent, given higher write-offs. This would, in turn, moderate the RoA/RoE trajectory (to 0.9-2.5 per cent/4-10 per cent over FY26-28E from the highs of about 5/20-21 per cent in FY23-24). In line with its strategy, the company also plans to onboard a Chief Credit Officer to enhance credit underwriting practices and expand its on-field recovery team, aiming to increase hard bucket recovery. Fusion has 19 per cent of its MFI portfolio in the state of Bihar, which we believe should be closely watched, given the upcoming elections.

Published on June 30, 2025