Fusion Micro Finance Limited's rating upgraded to 'CRISIL A/Stable'

CRISIL's Ratings has upgraded its long-term rating on the bank facilities and non convertible debentures of Fusion Micro Finance Limited (Fusion) to 'CRISIL A/Stable' from 'CRISIL A-/Stable'.

The revision in the rating is driven by substantial increase in capital position of the company and expected improvement in profitability. Fusion has completed raising fresh equity of Rs 600 crore recently which is ~43% of existing networth. Post this capital raise, Fusion's overall networth will rise over Rs 2,000 crore from Rs 1,416 crore as of June 30, 2022.

The rating action, further, takes into account expected improvement in the profitability of the company. In Q1 fiscal 2023, with the restoration in the macro factors, improved collections and pick up in credit growth, Fusion's RoMA improved to 3.7% (annualized basis). Further, in-line with revised regulatory framework, the company can now implement risk-based pricing. This in-turn is expected to improve average yields on incremental originated portfolio which will then flow into overall profitability.


The rating also factors in experienced leadership and senior management team along-with sound risk management/audit processes that are set-up by Fusion. These strengths are partially offset by moderate though improving asset quality, inherently modest credit risk profile of borrowers, and potential risk from local socio-political issues inherent to the microfinance sector.

In terms of portfolio growth, Fusion has scaled up its AUM to Rs 6,786 crore as of March 2022 as against Rs 4,637 crore (with Y-o-Y growth of 46%). The growth momentum has picked up from July 2021 onwards with average disbursement of Rs 600 crore per month. During fiscal 2023, AUM further grew to Rs 7,389 crore as of June 30, 2022, with YTD growth of 8.9%. In terms of asset quality, Fusion's 90+ days past due (dpd) improved to 3.7% as of June 30, 2022, as compared to 5.7% as of March 2022 and 5.5% in March 2021. It is noted that the company has written off Rs 497 crore (6.7% of their AUM as of June 2022) between March 2020 and June 2022. As of June 2022, company has outstanding restructured portfolio of Rs 42.9 crore (0.6% of the AUM).

Shares of Fusion Micro Finance Limited was last trading in BSE at Rs. 340.00 as compared to the previous close of Rs. 345.10. The total number of shares traded during the day was 80162 in over 2065 trades.

The stock hit an intraday high of Rs. 346.00 and intraday low of 334.15. The net turnover during the day was Rs. 27239659.00.

Source : Equity Bulls

Keywords

FusionMicroFinance INE139R01012 NBFC BankFacilities NCDs NonBankingFinanceCompany RatingUpgrade