Fusion Microfinance to enter Andhra, Telangana, open up to 30 branches

MFI plans to open 150 branches across the network across the country in the current financial year

Fusion Microfinance Ltd, a microfinance lender, is set to establish up to 30 branches across the southern states of Andhra Pradesh and Telangana. This move follows a High Court ruling which allayed concerns regarding dual regulatory control over microfinance institutions' (MFIs') operations.

Devesh Sachdev, Managing Director and Chief Executive of Fusion Microfinance, stated that the lender plans to open 12-15 branches in each state as part of calculated network expansion efforts. In the initial phase, the company intends to move slowly, focusing on building human capital, implementing processes, and understanding the local culture, given that these states have been disconnected from microfinance activities for many years.

On 14 February 2023, the Telangana High Court declared that non-banking finance companies (NBFCs) functioning as MFIs, which are regulated by the Reserve Bank of India (RBI), would not fall under the jurisdiction of state laws. Only the central bank has the authority to regulate these entities. This verdict mitigated worries about dual regulation, paving the way for NBFCs to establish and expand their businesses in these states. In the South, Fusion Microfinance, a Gurugram-based lender, already has a presence in Karnataka and Tamil Nadu.

Sachdev further added that the MFI intends to open 150 branches across the country during the current financial year. This comes after the company expanded its network by 137 branches over the previous 12 months, bringing its total count to 1,103 by the end of June 2023.

Commenting on the trend for Net Interest Margins (NIMs), Sachdev noted that despite a 27-basis-point increase in the cost of funds, the company has successfully passed this onto the customers. The NIMs improved to 10.89 per cent, rising by 151 basis points year-on-year and 32 basis points quarter-on-quarter. He expects the margins to reach the 11.2-11.4 per cent range within two quarters and then stabilise.

Fusion Microfinance's Assets Under Management (AUM) saw a 31.43 per cent year-on-year growth, increasing to Rs 9,711.75 crore in June 2023 from Rs 7,389.02 crore a year earlier. Sachdev added that the MFI would maintain a measured approach to growth, aiming to expand its book sustainably. The company reported a 29.25 per cent year-on-year growth in net profit, reaching Rs 159.46 crore in the quarter that ended in June 2023.