4 hours Ago By Moneycontrol
Warburg Pincus is expected to take the lead in Fusion Finance’s rights issue set to launch next week, said sources. However, not all promoters are on the same page, with Chicago-based Creation Investments hesitant to fully back the initiative. Creation holds 19.
78 percent stake in Fusion, making it a significant stakeholder, albeit behind Warburg Pincus, which held 32.83 percent stake as of December 2024. While the exact reasons for Creation’s lukewarm stance remain unclear, the firm, a long-standing partner of Fusion’s, has scaled back its involvement in recent years.
Creation’s holding in Fusion declined from 23.63 percent following a 3.8 percent stake sale for Rs 213 crore via a block deal in December 2023.
Warburg, on the other hand, is likely to spearhead the rights issue, despite offloading stake worth over Rs 5,000 crore in other portfolio companies like Bharti Airtel, IDFC First Bank, and Computer Age Management Services (CAMS) in 2023. Fusion Finance did not respond to the queries sent to them. The Rs 800-crore rights issue, aimed at enhancing capital adequacy and strengthening the balance sheet , comes at a time when Fusion Finance has been under strain due to a downturn in India's microfinance sector.
Moneycontrol had earlier reported that MFIs are facing repayment issues because of overleveraged borrowers, and high attrition, which is causing operational difficulties. On November 26, ratings agency ICRA downgraded the ratings and outlook of Fusion Finance’s NCD (non-convertible debenture) programme and subordinate debt due to concerns over asset quality and profitability. Fusion Microfinance, which started 2024 with strong "buy" calls, now faces a mixed sentiment with only 10 percent "buy", 40 percent "hold", and 50 percent "sell" recommendations.
The MFI had reported a third consecutive quarter of losses in FY25 of Rs 719.31 crore against a loss of Rs 305 crore in the previous quarter, and a profit of Rs 126.45 crore in the year-ago period.
During Q2 FY25, it reported higher-than-expected deterioration in its asset quality and profitability. The deterioration in asset quality was attributed to various factors including adverse climatic conditions, attrition at the field level, worsening credit discipline, and overleveraged borrowers, the ratings agency had said in a release..
