Fusion Finance Shares: The share of Fusion Finance Ltd (NSE: FUSION), which distributes loans to poor and socially backward women, fell sharply on Monday.
A brokerage firm has given it a sell rating, due to which there was heavy selling pressure on the shares.
Due to this, there was not a mild but a sharp sell-off in the stock and it fell 10 percent to a lower circuit of Rs 275.90 and it also closed at this level. This is a one-year record low for its shares.
On January 31, 2024, it was at a one-year high of Rs 674, that is, in 8 months it fell by more than 59 % and reached a one-year low today.
Why Did The Brokerage Advise To Sell Fusion Finance?
The brokerage has lowered its rating for Fusion Finance Ltd from hold to sell and has reduced the price of its target of 500 rupees to 300 rupees.
This cut in rating has come at a time when Fusion Finance Ltd has projected higher credit loss provisioning in the September quarter as compared to the June quarter.
The brokerage believes that this may lead to a credit downgrade, funding problems, or a decline in the loan book.
Another brokerage firm has also reduced its rating to neutral and the target price is Rs 440.
How Is The Business Health Of Fusion Finance?
In the exchange filing, the company revealed that its credit loss provisioning may be Rs 550 crore in the September quarter, while it was Rs 348 crore in the June quarter.
Now it will be revised only after the July-September 2024 results in the second quarter of FY 2025. In the June quarter, it recorded a net loss in the amount of 36 crore rupees and in the same quarter the previous year, it made net profits of 120 crore rupees.
The company attributed this to microfinance loans, which have a share of about 24 percent in the loan book. Its business health deteriorated due to customer over-leveraging, low attendance at center meetings, migration of customers, and layoffs of field staff.
Its asset quality also deteriorated in the June quarter with gross NPA jumping from 2.89 percent quarterly to 5.46 percent and net NPA also jumped from 0.6 percent to 1.25 percent during this period.
Quick Fact
| Company name | Fusion Finance |
|---|---|
| Loan customers | Poor, socially backward women |
| Loan distribution | Microfinance |
| Recent stock performance | Fell 10% to ₹274.70 |
| 1-year high | ₹674 (January 31, 2024) |
| 1-year low | ₹275.90 (Current) |
| Recent price drop | Over 59% in 8 months |
| Brokerage rating | Downgraded from hold to sell |
| Old possible target price | ₹500 |
| New possible target price | ₹300 |
| Credit loss provision | ₹550 crore (Expected, September quarter) |
| Credit loss provision (June quarter) | ₹348 crore |
| Net profit/loss (June quarter) | ₹-36 crore (Net loss) |
| Net profit (Same quarter, last year) | ₹120 crore |
| Microfinance share in loan book | 24% |
| Gross NPA (June quarter) | 5.46% |
| Previous Gross NPA (March quarter) | 2.89% |
| Net NPA (June quarter) | 1.25% |
| Previous Net NPA (March quarter) | 0.6% |
| Net profit (Same quarter, as last year) | Higher credit loss, funding issues |
| Other issues | Customer over-leveraging, low attendance, migration, layoffs |
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