Fusion Finance has retained its target of reaching Rs 10,000 crore in assets under management (AUM) by March 2027, projecting 20–25% growth in its annual book over the next two-three years, even as the company returned to profitability in FY26 following a prolonged phase of stress in the microfinance sector.
Managing director and CEO Sanjay Garyali said the company has guided for credit costs in the 3.25–3.75% range, while its internal operating model is built around 2.5%, building in buffers for potential global or macro disruptions. It is targeting a steady-state return on assets (RoA) of 3.75–4%. In the March quarter, RoA crossed 2%, a level the management views as a key confidence marker for sustainable expansion. The renewed growth push follows a profit of nearly Rs 14 crore in FY26.
Garyali attributed the turnaround to a structural reset in underwriting and operations. Over the past year, Fusion tightened customer acquisition guardrails to levels “at least twice as stringent as the industry median” and strengthened branch-level credit oversight by deploying dedicated credit officers at larger branches.
Approval rates improved from about 15% to 28–32% over the past three quarters, aided by a greater focus on existing customers. Even after reducing nearly 3,000 employees, monthly disbursements rose from around Rs 400 crore to over Rs 700 crore.
Tech-Driven Efficiency
Technology-led efficiencies supported the shift. Customer onboarding and collections have been fully digitised, enabling real-time EMI posting and eliminating manual receipts.
Asset quality metrics improved sharply, with gross non-performing assets declining to 3.21% in Q4FY26 from 7.92% a year earlier. Garyali described the improvement as structural rather than cyclical, citing stricter industry-wide adherence to self-regulatory norms and closer regulatory scrutiny.
Incremental borrowing costs declined to 10.8% in Q4 from 11.8% in the previous quarter. The company has bank sanctions of Rs 1,500–1,800 crore lined up over the next 60 days and is maintaining elevated liquidity of Rs 1,800–1,900 crore as a buffer against potential volatility.
Fusion also plans to utilise the recently announced credit guarantee framework for bank lending to NBFCs. Garyali said the company expects Rs 250–300 crore of funding under the scheme within the next 25–30 days, subject to final operational guidelines.
Strong Liquidity Buffers
Despite its growth ambitions, the lender does not foresee the need for fresh equity over the next year. With net worth of nearly Rs 2,456 crore and an additional Rs 300 crore of deferred tax asset reversals expected over the next year, the management believes internal accruals are adequate to support expansion.
The company is also scaling up its secured MSME portfolio, currently disbursing Rs 45–50 crore monthly. MSME is expected to contribute about 15% of the Rs 10,000-crore AUM target by FY27, rising to 15–20% over time. The portfolio is entirely loan-against-property lending, with no overlap with its microfinance customer base.
On geopolitical tensions and crude price volatility, Garyali said there has so far been no material impact on the repayment behaviour, though the company is monitoring developments closely and undertaking branch consolidation to eliminate non-productive costs.