In This Article:
Release Date: February 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Fusion Finance Ltd (NSE:FUSION) has implemented stringent credit criteria, resulting in a superior quality portfolio since August 2024.
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The company has seen a consistent improvement in net flow rates month on month across all DPDs, with a 200 basis point improvement since October.
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Net collection efficiency has risen to 97.7% in December 2024 from 96.1% in Q2 FY25.
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The capital adequacy ratio stands at a healthy 22.2%, which is expected to improve further with the planned rights issue.
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The MSME vertical is growing at a good pace with 85% of loans being secured, indicating a healthy portfolio.
Negative Points
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The company is facing high attrition rates among loan officers, which remains a challenge despite efforts to stabilize branch operations.
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There is a significant gross NPA of 12.58%, indicating ongoing asset quality issues.
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Interest income has seen a sharp fall due to derecognition on stage 3 assets and portfolio de-growth.
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The company is still in breach of financial covenants amounting to INR 5,288 crore as of December 2024.
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Certain geographies, such as Tamil Nadu and Odisha, are lagging in collection efficiency, impacting overall performance.
Q & A Highlights
Q: What is the outlook for collections and disbursements, and how is the company addressing loan officer attrition? A: (Unidentified_2) The company is currently focusing on stabilizing collections and expects this process to continue for another one or two quarters. Disbursements will pick up once the system acclimatizes to new credit underwriting norms. Regarding attrition, the company has reduced the load on field officers and changed incentive structures to stabilize branch operations. Attrition has decreased to under 50% from higher levels in August and September.
Q: Can you provide more details on the rights issue and any potential delays? A: (Unidentified_2) The rights issue has been increased to INR 800 crore, with the first tranche of INR 400 crore expected soon. There are no hesitations from promoters, and the delay is due to awaiting SEBI approval. The process is procedural, and there is no connection to the appointment of a new COO.
Q: How confident is the company about the improving collection efficiency, and what are the expected credit costs? A: (Unidentified_2) The company is cautiously optimistic as green shoots are visible, with February collections better than January. However, they prefer to monitor the situation for a few more months before forming a definitive opinion. Most of the credit cost pain has been addressed, and the company aims to minimize impact in the new financial year.