Brokerage firm CLSA has an “Underperform” rating on Fusion Microfinance and slashed its target price to ₹155 from ₹260, citing higher-than-expected losses and operational challenges. The company reported a net loss of ₹305 crore in Q2FY25, driven by elevated credit costs of 28.6% (annualized), exceeding management guidance.
Fusion Microfinance has taken accelerated provisions and tightened its underwriting norms, aligning them stricter than regulatory guardrails. However, the company faces challenges, including higher gross and net non-performing assets (GNPA and NNPA) and a recent CARE rating downgrade, which triggered covenant breaches with lenders.
Despite these hurdles, management clarified that waivers from all lenders had been secured in Q1FY25 for either the full year or H1FY25. The company is now focused on completing a rights issue in CY24 as part of its recovery strategy.
