Warburg Pincus backed Fusion Microfinance is planning to grow its overall assets under management (AUM) by 25% in FY25, with focus on enhancing business from newer branches, MD & CEO Devesh Sachdev told FE. As on March 2024, the microfinance institution’s (MFI) assets under management (AUM) stood at Rs 11,476 crore, up 23% year-on-year (YoY).

In FY24, it opened 211 branches and will open 300 more branches in FY25. The new branches will be spread across India, with a dominant portion being deployed in Karnataka, Telangana and Andhra Pradesh—the states where Fusion entered in FY24.

The MFI, however, has stopped fresh disbursals of loans in the state of Punjab since December 2023 due to stress emanating from uneven rains, farmer protests and talks of loan waivers in some districts. “Covid-19, followed by farmers protest, uneven rains and talks of loan waivers in some districts made us halt disbursements in December,” he said. Punjab accounted for 2.8% of the overall portfolio.

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While Fusion MFI’s overall collection efficiency stood at 98.3% in Q4FY24, collection efficiency in Punjab was lower at 75% during the same period. The MFI has made Rs 100 crore of provisions for stressed exposure in the state, Sachdev said. It would resume lending operations in Punjab once the macro environment normalises.

Sachdev added that the MFI is targeting to lower its net credit cost from 3.49% in FY24 to less than 3% in FY25. Gross non-performing asset ratio (GNPA) reduced from 3.5% in FY23 to 2.9% in FY24, whereas net NPA ratio reduced from 0.9% to 0.6% during the same period.

The MFI earlier this month reported its Q4FY24 net profit at Rs 132.7 crore, up 16% YoY, whereas net interest income rose 32% YoY to Rs 360 crore in Q4. Sachdev expects cost of funds to slightly moderate in Q1FY25, and accordingly anticipates net interest margin (NIM) to rise to 11.75%-12% from 11.22% in FY24.

Fusion will also hire almost 3,000 new employees in the current financial year for manning the newer branches, and other operational purposes. The existing employee base of the MFI stands at about 13,000, including in-house collection agents.