Fusion Finance shares: JM Financial downgrades stock to 'Reduce' after Q2 loss
The domestic brokerage highlighted that the company's earnings were significantly below estimates due to pressure on core income, higher operating expenses and elevated provisions.
- Nov 7, 2025,
- Updated Nov 7, 2025 11:07 AM IST
JM Financial has downgraded Fusion Finance Ltd (formerly known as Fusion Micro Finance Ltd) to 'Reduce' from 'Hold' following a weak set of numbers for the July–September quarter (Q2 FY26). The domestic brokerage highlighted that the company's earnings were significantly below estimates due to pressure on core income, higher operating expenses and elevated provisions.
Fusion Finance reported a net loss of Rs 22.1 crore in Q2 FY26, against JM Financial's estimate of a Rs 14.8 crore profit. The company's net interest income (NII) fell 38 per cent year-on-year (YoY) and 10 per cent quarter-on-quarter (QoQ), while operating expenses were higher than expected.
Provisions also exceeded estimates by 15 per cent, although they declined 84 per cent YoY and 38 per cent sequentially as the company utilised Rs 15 crore from its management overlay, a trend expected to continue.
On asset quality, the gross stage-3 (GS3) ratio declined 82 basis points (bps) sequentially, driven by write-offs, but the net stage-3 (NS3) ratio rose 19 bps to around 0.4 per cent. The provision coverage ratio (PCR) on stage-3 assets fell to 90.9 per cent from 96.2 per cent in the previous quarter.
Collection efficiency stayed largely stable at 98.5 per cent versus 98.6 per cent in Q1, while forward flow rates improved slightly in September, with PAR0+ net flows stabilising at 0.5–0.6 per cent.
The company's assets under management (AUM) contracted 39 per cent YoY and 8 per cent QoQ, as disbursements remained weak. Management expects AUM to stop shrinking after Q3 as loan growth improves.
Citing limited near-term growth visibility and muted operating performance, JM Financial cut its FY26 earnings estimate by 35 per cent and set a 12-month target price of Rs 165, valuing the stock at 1.0x FY27E P/BV.
Last checked, Fusion Finance shares were up 0.35 per cent at Rs 173.35 in Friday's trade.
JM Financial has downgraded Fusion Finance Ltd (formerly known as Fusion Micro Finance Ltd) to 'Reduce' from 'Hold' following a weak set of numbers for the July–September quarter (Q2 FY26). The domestic brokerage highlighted that the company's earnings were significantly below estimates due to pressure on core income, higher operating expenses and elevated provisions.
Fusion Finance reported a net loss of Rs 22.1 crore in Q2 FY26, against JM Financial's estimate of a Rs 14.8 crore profit. The company's net interest income (NII) fell 38 per cent year-on-year (YoY) and 10 per cent quarter-on-quarter (QoQ), while operating expenses were higher than expected.
Provisions also exceeded estimates by 15 per cent, although they declined 84 per cent YoY and 38 per cent sequentially as the company utilised Rs 15 crore from its management overlay, a trend expected to continue.
On asset quality, the gross stage-3 (GS3) ratio declined 82 basis points (bps) sequentially, driven by write-offs, but the net stage-3 (NS3) ratio rose 19 bps to around 0.4 per cent. The provision coverage ratio (PCR) on stage-3 assets fell to 90.9 per cent from 96.2 per cent in the previous quarter.
Collection efficiency stayed largely stable at 98.5 per cent versus 98.6 per cent in Q1, while forward flow rates improved slightly in September, with PAR0+ net flows stabilising at 0.5–0.6 per cent.
The company's assets under management (AUM) contracted 39 per cent YoY and 8 per cent QoQ, as disbursements remained weak. Management expects AUM to stop shrinking after Q3 as loan growth improves.
Citing limited near-term growth visibility and muted operating performance, JM Financial cut its FY26 earnings estimate by 35 per cent and set a 12-month target price of Rs 165, valuing the stock at 1.0x FY27E P/BV.
Last checked, Fusion Finance shares were up 0.35 per cent at Rs 173.35 in Friday's trade.