Fusion Finance shares rally 18% in a month as turnaround gains traction

Fusion Finance has rallied nearly 18% in a month after returning to profit in Q3FY26. Brokerages cite improving asset quality, lower credit costs and strong capital buffers

Shares of Fusion Finance have rallied nearly 18 per cent over the past month, outperforming benchmark indices such as the Nifty and Bank Nifty that were largely flat.

 

The recent rally comes as several brokerages, including ICICI Securities, Motilal Oswal Financial Services and IIFL, have turned constructive on the microfinance lender following its return to profitability in the December quarter of FY26.

 

Analysts cite improving asset quality, sharply lower credit costs and a strengthened capital position, though some continue to flag risks around the pace of balance sheet normalisation.

 

Fusion reported a profit after tax of Rs 14.1 crore in Q3FY26, snapping a six-quarter losing streak. The turnaround follows a management transition in March 2025, when Sanjay Garyali took over as chief executive, alongside a comprehensive reset of the business model and operating processes.

 

The recovery in the December quarter was underpinned by a sharp moderation in credit costs to 4.6 per cent from a peak of over 21 per cent a year ago, aided by steadily improving collections.

 

Disbursements also picked up meaningfully, rising 23 per cent quarter-on-quarter to Rs 1,590 crore — the highest in the past five quarters — while core operating performance strengthened, with pre-provision operating profit jumping 44 per cent year-on-year and net interest margins expanding 240 basis points to 11.3 per cent.

 

Auditors, citing sustained improvement in asset quality and profitability, restored the company’s going-concern status during the quarter, said a note by ICICI Securities, which has a target price of Rs 240 on the stock. The stock was last trading at Rs 196, up 2.6 per cent.

 

Under the new leadership, Fusion has rolled out a series of organisational and process changes, including strengthening the senior management team, tightening credit underwriting, adding an extra supervisory layer for field operations and enhancing audit and fraud-monitoring mechanisms at the branch level. These measures are beginning to reflect in portfolio metrics, believes the brokerage.

 

While disbursement momentum has improved, assets under management declined about 2 per cent sequentially to Rs 6,880 crore, reflecting the lagged impact of elevated repayments. Fusion’s management has indicated that fresh additions have exceeded repayments over the past couple of months and expects AUM to cross Rs 10,000 crore in FY27. It also expects credit cost to moderate to 3.25–3.7 per cent in FY27.

 

The company ended Q3 FY26 with a capital adequacy ratio of nearly 39 per cent and liquidity of about Rs 1,780 crore underpinned by borrowing and last year’s rights issue.

 

Analysts say this provides headroom for growth.