Fusion Finance has been assigned a CARE A (RWN) rating by CARE Ratings for its proposed ₹150 crore Non-Convertible Debenture (NCD) issue. The rating agency has also maintained the Rating Watch with Negative implications on the company's existing ₹1,500 crore long-term bank facilities. This rating action was communicated through a letter dated December 16, 2025.

Rating Action Summary

The comprehensive rating action by CARE Ratings encompasses both new and existing financial instruments:

The Rating Watch with Negative implications reflects ongoing concerns about the company's financial covenant compliance and overall credit profile.

Financial Covenant Challenges

The negative rating watch stems from significant covenant breaches affecting a substantial portion of Fusion Finance's borrowing portfolio. As of September 30, 2025, the company was in breach of financial covenants on borrowings totaling ₹2,077 crore, resulting in these facilities becoming repayable on demand.

The covenant breach situation presents a mixed picture:

Despite these covenant breaches, CARE Ratings notes that no lender has demanded immediate repayment or charged penal interest from the company.

Liquidity and Capital Position

Fusion Finance maintains adequate liquidity despite the covenant challenges. The company holds comfortable liquidity of ₹892 crore with unavailed sanctioned credit lines of ₹2,730 crore as of September 30, 2025. The company successfully raised ₹1,554 crore in funding during H1 FY26, demonstrating continued lender support.

The capital position has been strengthened through equity infusion:

Asset Quality and Performance Indicators

The company's asset quality metrics show improvement in H1 FY26, primarily due to write-offs. Gross Non-Performing Assets (GNPA) improved to 4.61% as of September 30, 2025, compared to 7.90% as of March 31, 2025. Net NPA stood at 0.38% versus 0.30% in the previous period.

Fusion Finance's Assets Under Management (AUM) declined to ₹7,038 crore as of September 30, 2025, from ₹8,980 crore as of March 31, 2025, reflecting the challenging operating environment in the microfinance sector.

Business Operations and Market Presence

Fusion Finance operates across 22 states and union territories with a diversified geographical presence. The company's top three states by exposure are Uttar Pradesh (26%), Bihar (19%), and Madhya Pradesh (9%). The company has expanded into the MSME sector, with this segment comprising 10% of total AUM as of September 30, 2025, up from 0.03% in March 2020.

The rating agency expects the company's asset quality and profitability to improve gradually, with visible improvement anticipated in FY27. The company's ability to maintain lending relationships while raising funds at competitive rates remains a key monitoring factor for future rating actions.

Fusion Finance Limited's Working Committee has approved a significant debenture allotment worth ₹160 crores. The company, formerly known as Fusion Micro Finance Limited, conducted a meeting to deliberate on this private placement initiative.

Debenture Allotment Details

The Working Committee approved the allotment of 16,000 secured, rated, listed, redeemable, transferable, non-convertible debentures through private placement. Each debenture carries a face value of ₹1,00,000, collectively aggregating to ₹160,00,00,000.

Interest and Maturity Structure

The debentures offer a coupon rate of 10.95% per annum with a structured payment schedule. The tenure of the debentures is set at 3 years.

Security and Charge Structure

The debentures are secured by a comprehensive charge mechanism to protect investor interests. The outstanding principal amount is secured by a first ranking and exclusive charge of 1.10x over the company's receivables, including present and future receivables that are free from any encumbrances, charges, or liens.

Regulatory Compliance

The allotment was conducted in accordance with Regulation 30 read with Schedule III of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. This ensures complete regulatory compliance and transparency in the debenture issuance process.