Fusion Finance is planning to lower its microfinance loan share from 88% to 70% by fiscal 2029. The company will launch unsecured individual loans in September 2026 for higher-income borrowers to reduce risk. This follows a strong quarterly turnaround, with the company reporting a profit of Rs 62.4 crore for Q1 FY27, compared to a loss in the same period last year.
Fusion Finance is taking a major step to change its business model by reducing its heavy reliance on microfinance loans. The company has announced plans to bring down its microfinance loan portfolio to 70% of total assets by fiscal year 2029, a significant reduction from the current 88%. This shift is part of a larger strategy to lower business risk by moving into other types of retail lending.
Starting in September, the company will introduce unsecured loans for individual borrowers. This new product is designed for customers with an annual family income above Rs 3 lakh. By moving into this segment, the company aims to broaden its base beyond the microfinance business, which is often sensitive to economic changes in rural and semi-urban areas. The regulatory environment also supports this change, as the Reserve Bank of India has lowered the minimum requirement for microfinance assets for non-banking financial companies (NBFC-MFIs) to 60%, allowing lenders to allocate more capital to other retail or small business segments.
This strategic pivot comes at a time when the company’s financial performance is showing signs of recovery. For the first quarter of fiscal year 2027, Fusion Finance reported a net profit of Rs 62.4 crore, a major improvement from the loss of Rs 92.25 crore it faced in the same quarter last year. The company’s total assets under management stood at Rs 7,702 crore at the end of June 2026, and it has set an ambitious target to reach Rs 10,000 crore by the end of the current financial year.
While the strategy aims to stabilize the business, it does involve execution risks. Moving into unsecured individual loans requires different credit assessment skills compared to microfinance, which has traditionally relied on group-based lending models. Additionally, investors should be aware of the company's past financial history. Earlier this year in May, the company reported a breach of certain financial covenants, highlighting the importance of monitoring its debt position and financial health. Maintaining high asset quality, which stood at a gross non-performing asset (GNPA) ratio of 2.51% in the June quarter, will be a key challenge as it enters this new lending space.
The next important updates for investors will be the initial rollout of the individual loan product and how well the company manages its profit margins, which showed a net interest margin of 11.93% in the June quarter. Monitoring the company’s ability to grow its loan book while keeping defaults low will be essential for assessing the success of this new direction.