Fusion Microfinance incurred a significant net loss of approximately INR 3.1 billion in the second quarter of FY25, surpassing expectations of a loss of INR 1.8 billion. This was mainly due to higher credit costs.

Despite a year-on-year increase in net interest income of around 30% to INR 4 billion and a 17% rise in pre-provision operating profit to INR 2.8 billion, the cost-to-income ratio has risen to about 40%. Credit costs rose to INR 6.9 billion, significantly higher than the expected INR 5.2 billion, resulting in an annualized credit cost of 26%. Disbursements declined sharply by 44% quarter-on-quarter to INR 16.6 billion, and assets under management (AUM) decreased by 5% to INR 116 billion.

Analysts have revised earnings per share estimates downward for FY25, FY26, and FY27, reflecting lower AUM growth and persistently high credit costs. Fusion is currently seeking waivers from lenders for covenant breaches, and the outlook remains challenging. The rating for the company is neutral, with a target price of INR 165 based on a price-to-book ratio of 0.5x for September 2026 estimates.