Even as large-scale lenders witnessed a moderation during Q2FY24 in their net interest margin (NIM)—a key measure to judge lenders’ profitability–small ticket loan player Fusion Microfinance (MFI) is targeting to expand its net interest margin (NIM) to 11.3%-11.5% by March end from 11.1% in July-September, MD & CEO Devesh Sachdev told FE.
The rise in NIM will primarily be led by a five-10 basis points (bps) expected reduction in borrowing cost going ahead, Sachdev said, as rating agency CRISIL in October upgraded the MFI’s long term bank facility and debt instrument rating to “A+” from “A”. Fusion MFI’s marginal cost of funds stayed flat quarter-on-quarter (QoQ) at 10.55% during Q2FY24, whereas lending yield rose 20 bps sequentially to 21.7%.
“Whatever incremental borrowing which we have got in the last two months also from all the large banks like SBI, HDFC, ICICI, Kotak, Axis, SIDBI is at a better rate… with our very tight focus on the cost of operations, you will see the NIM further growing before it stabilises…,” Sachdev said.
The MFI on November 6 reported its Q2 net profit at Rs 126 crore, up 32% (year-on-year) YoY, led by robust loan growth and asset quality. Its total asset under management (AUM) rose 25% YoY to Rs 10,026 crore and will continue growing at the pace of 25% during H2FY24, he said. 96% of the overall AUM consists of MFI loans whereas 4% constitutes loans towards micro, small and medium enterprises (MSMEs), he said. Further, the MFI disbursed Rs 2,344 crore of loans in Q2FY24, up 14% from corresponding period previous fiscal and the disbursals are likely to rise to Rs 2,500 each quarter going ahead.
Fusion MFI currently has 1,164 branches and planned to open nearly 170 branches in the current fiscal, of which nearly 79 have already been opened in the first half of current fiscal. About 116 of Fusion MFI’s branches are in Madhya Pradesh, 99 in Rajasthan and 33 in Chhattisgarh. When asked whether the MFI anticipates any stress in terms of loan waivers due to state elections, Sachdev said voting in Chhattisgarh has already been conducted and that in remaining two states no party has announced loan waivers till now.
“Rajasthan and MP model code of conduct is already implemented. There is no such disturbance or anything about the loan waiver. You have seen how the quality has changed. They are giving more direct benefit to the customer rather than announcing waivers,” he said.
The MFI’S gross and net non-performing asset (GNPA, NNPA) ratio stood at 2.68% and 0.65% as of September 30, respectively, and the GNPA will further moderate to below 2% by FY24 end, Sachdev said. He added that the MFI is also targeting lowering credit cost to below 3% by end of fiscal from 3.34% in Q2.