Fusion Finance Ltd (NSE: FUSION) Q3 2026 Earnings Call dated Feb. 09, 2026
Corporate Participants:
Smit Shah
Sanjay Garyali — Chief Executive Officer
Krishan Gopal — Chief Finance Officer
Analysts:
Unidentified Participant
Rajiv Mehta — Analyst
Viral Shah — Analyst
Ashlesh — Analyst
Sohail Kanalil — Analyst
Sonal Minhas — Analyst
Abhijit Tibrewal — Analyst
Presentation:
operator
Ladies and Gentlemen. Good day and welcome to The Fusion Finance Limited Q3 and 9 months FY26 post results earnings Conference call. As a reminder, all participants line will be in listen only mode and there will be an opportunity for you to ask question after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference has been recorded. I now hand over the conference to Mr. Smith Shah from AD Factors PR. Thank you. And over to you sir.
Smit Shah
Thank you. Good morning everyone and thank you for joining US on the Q3 9M FY26 earnings conference call of Fusion Finance Ltd. We have the company senior management team with us today on this call. Before we begin, I would like to remind that certain statement made in today’s discussion may be forward looking in nature and may involve certain risks and uncertainties. A detailed statement in this regard is available in the Q3 and 9M FY26 investor presentation that has been uploaded on the stock exchanges and the company website. I now hand over the call to Mr.
Sanjay Garriali, MDA and CEO Fusion Finance Limited to begin the proceedings. Thank you and over to you sir.
Sanjay Garyali — Chief Executive Officer
Good morning everyone and thank you for joining us for Fusion Finances Q3 and 9 month FY26 earnings call. As we begin the new calendar year, I wish you and your families a very happy and prosperous new year. Before moving to performance, I would like to acknowledge two important leadership developments that significantly strengthen our platform for the next phase of growth. We recently appointed Mr. Krishan Gopal as CFO effective January 17, 2026. Krishan brings over two decades of experience and adds strong financial leadership as we scale the business at the board level. We have welcomed Mr.
Brahmanand as an independent Director. A veteran founder with deep operating expertise in MSME and rural financial ecosystems. His founder led perspective and grassroots understanding of small enterprise lending will materially strengthen our strategic direction as we expand our MSME and semi urban franchise. I would also like to place on record our sincere appreciation for Amandeep Singh who served as interim CFO during a particularly critical phase for the company. Q3 represents an important inflection point for Fusion. The business has now entered a phase of control, stabilization and disciplined execution. I am pleased to share that we have returned to profitability this quarter delivering a PAT of 14 crores.
This was supported by broad based improvements across asset quality, collections, credit cost and disciplined disbursement growth. Importantly, our auditors have reviewed the company’s financial position and confirmed that the earlier emphasis relating to going concern is no longer relevant. Reflecting the strengthened stability and resilience of the business, the quarter also marks our third consecutive period of improvement in asset quality, collections and credit cost. Importantly, this progress has been achieved without relaxing underwriting guardrails, reinforcing the durability of our recovery. Let me begin with disbursements. Q3 disbursements stood at 1594 crore up from 1298 crore in the previous quarter.
This growth was driven by two focused initiatives, first, reducing operational friction for our front end teams and second, leveraging a pre approved base of high quality clients where approval rates are significantly stronger. Approximately 30% of our new disbursements now come from this pre approved base with approval rates close to 50%. As we highlighted last quarter, our credit framework is increasingly anchored at the branch and district level. Our top performing branches categorized as A and B demonstrate significantly lower portfolio stress and superior collection efficiency. These branches account for 82% of our network and contribute 91% of fresh disbursements.
Our credit guardrails remain stronger than industry standards and extend beyond traditional bureau based assessments. We are also seeing a strong traction on the MSME portfolio, particularly in the 7 to 15 lakh ticket size segment. While this is an evolving journey, we have built scalable processes and tools that position this business for meaningful growth. Momentum in disbursements in both MFI and MSME has continued into January where we have already crossed 670 crores between more than 1 lakh customers for the past three months. New additions have hence exceeded repayments setting the stage for sustained book growth. Turning to our most important metric, current bucket collection efficiency, through continued emphasis on ground level discipline and strong guardrails, collection efficiency now stands at 99.4% in December and 99.7% within that on the new book which currently represents 80% of the portfolio.
We are also seeing strong discipline in center meetings reflected in improving collection behavior. Approximately 94% of collections are realized on the same day, most of it from the center meetings with a further 4% collected within the same week and the balance 1.5% within the same month. We have also seen a sharp reduction in borrower leverage with clients having exposure to more than three lenders now drastically reduced to 7% of pause down from earlier levels of 16 to 17%. Our net flow forward rate in the current bucket stands at 0.25% translating to an effective collections efficiency of 99.75%.
This performance gives us confidence that credit costs in a stable state are expected to normalize in the range of 3.25 to 3.75%. On recoveries, our in house collection team continue to deliver improving results. We are currently averaging over 12 crore per month of 60 plus DPD recoveries in cash with approximately over 85% driven by internal teams. We continue to invest in strengthening this capability and are targeting 50 crores in quarterly recoveries. On the technology front, we are pleased to share that most of the work related to our enhanced LMS and LOS platforms is complete. We expect to begin UAT in the coming weeks with phased implementation targeted for completion by May this year.
These upgrades will modernize legacy processes, improve front end execution and provide real time visibility into operational gaps. Finally, a brief word on our people who remain the foundation of our execution. The Branch manager role, core to our JLG processes and field culture has stabilized meaningfully with annual attrition at around 30% and firmly under control. Over 75% of our branch managers now have more than three years of vintage. This deep experience at the frontline is critical to sustaining operational discipline and consistent execution. Looking ahead to FY27 we have outlined a detailed roadmap to cross 10,000 crores in AEM.
We are confident that on the stable book the credit cost will be in the range of 3.25 to 3.75% and we will continue to optimize the operating expenses. With a strengthened leadership team and solid capital backing the we are confident in delivering on this plan. With that I would like to hand over the call to Krishan for his introductory analyst call and take you through the financial performance in greater detail.
Krishan Gopal — Chief Finance Officer
Thank you Sanjay and good morning everyone. As this is my first earnings call with Fusion, I would like to briefly say that I am pleased to be addressing you all this morning. Over the past few days I have worked closely with the management team to ensure continuity in the execution and financial discipline and I’m encouraged by the strength of the people balance sheet and the progress made by Fusion across key financial matrices. I now take you through our financial performance for quarter three and nine months of financial year 26 starting with our capital and liquidity position.
The liquidity remained comfortable at about 1783 crore at as of December and our capital Adequacy stood at 38.8% providing adequate headroom for regulatory requirements. In addition to the liquidity of 783 crore company has sanctions in hand of 1825 crore which we can draw at any point of time. The first and final call of the rights issue received a robust response and we got rupees 390 crore subscription that is approximately 99% from the issue size of 400 crores. Fusion is indebted to its lenders for their continued supports towards liquidity supply and supports extended to the company during the recent times.
With the challenges around the going concern and covenant breaches, we are glad to share that the support has continued and going concern challenges behind the company now. The company has significantly strengthened its funding profile through diversified borrowings across banks, financial institutions and development focused lenders, reducing concentration risk and enhancing funding resilience. During the quarter we raised rupees 2,127 crore comprising term loans of 1347 crore, direct assignment transactions of 434 crore, NCDs of 310 crore and PTCs of 37 crore totaling the total debt raised in the first nine months till December 25 to rupees 3940 crore from our lenders.
This ongoing confidence is reflected not only in waiver approvals but also in fresh credit lines extended to us, underscoring the resilience and credibility of our company within the financial ecosystem. Importantly, several banks have freshly opened up to Fusion and lenders who were earlier in wait and watch mode have now started to actively re engage with Fusion, underscoring the improving lender sentiment towards the company. This expanding lending universe combined with healthy liquidity and sustained profitability positions us well to support our growth plans in a prudent manner. During my early interactions with our lending partners, it is clear that relationships remains strong and constructive.
Waiver coverage for covenant related matters has improved further with approximately 97% coverage achieved as of date reflecting continued lender confidence. This confidence is also visible in the continued availability of funding lines and renewed credit limits, reinforcing Fusion’s credibility within the financial ecosystem. Moving to funding and margin performance, our average cost of funds remained broadly stable at 10.3% while marginal cost of funds moderated to 11.8%. Net interest margin for the quarter stood at 11.3% supported by a favorable portfolio mix, improving asset quality and lower income reversals from stage three assets. Going forward, we are confident that with the diversity of sanctions in hand and availability of liquidity and profitability, we would like we would be anticipating our marginal cost of borrowing to continue to improve from current levels.
We expect that our credit rating agencies shall take cognizance of the developments at Fusion, reflecting the Strengthening of our funding mix, lender confidence and overall financial profile. Turning to the expected credit loss and asset quality, the company has maintained a strong emphasis on portfolio hygiene and constructive provisioning. Conservative provisioning asset quality matrices improved further during the quarter with gross NPA declining to 4.38% and net NPA remaining contained at with right of recovery at 14 crore and net credit loss impact to the profit and loss for Q3 stood at 65 crore equivalent to 1% of the average on book loans.
ECL provisions as of December stood at 353 crore compared to 440 crore in the previous quarter. Stage 3 coverage remained strong at 86% while combined stage 2 and stage 3 coverage stood at approximately 80% reflecting a prudent approach to recoverability and focus on minimizing P and L volatility. During the quarter there was a write off impact of 170 crore on the portfolio and we released 15 crore of management overlay based on the management analysis including asset quality matrices. The reduction in delinquency and the conservative provisioning approach under Eclipse supported by higher provisioning coverage across stages.
On operating performance, the focus on cost discipline and productivity improvements continues. The cost to income ratio for the quarter stood at 69% while overall operating costs were nearly flat quarter on quarter. Any sequential movement in operating cost ratios is largely attributable to portfolio normalization and is expected to stabilize as growth resumes. Despite a calibrated approach to the balance sheet expansion Pre provisioning, operating profit for the quarter stood at 94 crore demonstrating the underlying earnings strengths of the franchise and the benefits of operating efficiencies. During the quarter there was also a one time charge to the P L towards the new Labor Code which resulted into an impact of 6.91 crore.
Excluding that the pre PPOP would have been about 100 crore and the profitability would have been above 20 crores. To conclude, Q3 and 9 months FY26 mark a period of continued strengthening of Fusion’s financial profile characterized by the stable margins, strong provision coverage and healthy liquidity. As I take on this role, my focus will remain on sustaining financial discipline, strengthening lender relationships and supporting calibrated well guarded growth. With improving asset quality and robust capital buffers, we are well positioned to deliver steady progress in the coming quarters. Thank you. Thanks everyone. We can now open the session for the Q and A.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their Touchstone telephone. If you wish to Remove yourself from the question queue. You may press star and two participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rajiv Mehta from ES Securities. Please go ahead.
Rajiv Mehta
Yeah. Hi. Good morning. Congrats on good performance. So sir, while you have already communicated January disbursement numbers but can you also you know talk about the net go forward trend in January and so far how it is shaping up in February. And also you can share the first bucket 1 to 30 dbd bucket as of September and December.
Sanjay Garyali
Yes Rajiv, sure. So on disbursements we have explained that the disbursement trend continues and this is despite stronger guardrails on the flow rates. I can’t tell you exact numbers because we don’t publish like that. We give you only quarterly numbers. But I can give you a confirmation that January is better than the quarter three flow forward rate on the X bucket. Net flow forward rate on the X bucket. Yep. Okay. So and this is a very secular. So this is across states and there is no particular state. And we also share state level collection efficiency. So this is across state. There is no state where we see any dip. The second is on the first bucket is approximately. So what we ended total is about 48 crore is what the first bucket is.
Rajiv Mehta
And that would have come down right from September.
Sanjay Garyali
Yeah, that’s come down by about 15 crores from September. So yeah that come down from actually about over 75 crores from September. To give you an exact number, September end 1 to 30 was close to about 87 crores. And now it is 44 crores.
Rajiv Mehta
Oh great. Yeah. Okay answer when you talk about this. Pre approved eligibility and then you know that is how you approach growth and which is also helping you. You said that that pool of customer wherein you have figured out there’s a pre approved. You can do some pre approval based lending. How exactly you approach a customer? I mean this is all group, right? There’s not nothing is individual when you talk about pre approved, you know, opportunity in a certain client.
Sanjay Garyali
Okay, so I think the. So the question that you’re asking is that how do we, how are we utilizing the pre approved base?
Rajiv Mehta
Yeah, you said 30% of this was spent for Q3.
Sanjay Garyali
So just let me explain to you. The pre approval happens at an individual level. It happens within the group. But not every customer would I pre approve. So let’s say there are my average center meeting size is let’s say seven and five of those customers are let’s say eligible for the next stage. Not everybody would I pre approve. So I’m pre approving where my on a certain base of customers where I see the propensity of taking that to be very high and I’m keeping in the pre approved base, I’m keeping the leverage even lower than what my guardrails are.
So essentially what I’m directing my sales team or the front end teams to focus on this because my. Because our data says that the approval rates and the behavior and the power of the pre approved base is far better than even rest of the customers that we are acquiring. And the. So the pre approved base essentially operates at an individual level, but it addresses the group. The customer is not required individual customer, the customer will be. So there will be more in a pre approved, there will be at least two customers in the group which I will give a repeat loan to for that center meeting to be eligible.
Rajiv Mehta
Okay, so would you introduce another loan or you would enlarge the size of the loan if he is eligible for a larger amount of loan as per your analysis. So when do you do that with that customer? Or you wait for the cycle to get over and then you offer him a larger loan?
Sanjay Garyali
Correct. So we do not have two loans for the same customer in the system. We just have one loan for one customer in the system. Now the pre wilder normal cycle is after 14 months. The pre approved is after 19 months. So the vintage of the customer with us is much higher.
Rajiv Mehta
Got it.
Sanjay Garyali
So the customer who’s ended, who’s had a vintage of 19 months with us, you know all our guardrails. One of the critical guardrails is that the customer should not be delinquent currently. Whatever bucket. The customer should not be delinquent currently. We do not fund delinquent customers even in the first bucket, whether of competition or fusions. So for to qualify for a pre approved base the customer has to be 19 months of vintage versus 14 months which is our normal guardrail.
Rajiv Mehta
Okay sir, thank you. Best of luck.
operator
Thank you. The next question is from the line of viral Shah from IIFL Capital. Please go ahead.
Viral Shah
Yeah. Hi. Thank you for the opportunity and I would say congrats for now. Finally the first quarter of profits after this entire stress. Sanjay, a few questions for you. One is with regards to first of all the profitability itself. Now that we have turned a profit, do you intend to recognize the DTA in 4Q? And if my calculations are right, what would be that quantum? Would it be roughly around 400450 crores in 4Q.
Sanjay Garyali
So is that your only question viral or is there.
Viral Shah
No, I have a couple.
Sanjay Garyali
Yeah. So if you can put down all your questions, I’ll answer them together.
Viral Shah
My second question was just a clarificatory with regards to the current collection efficiency. So I think on the executive summary the number is bit different from on page 17. Is it a change in the methodology that we have done in this quarter? And if you can just touch base on that, what is that change? And thirdly, basically wanted to understand how has this net forward flow rate there is a sharp decline from 60bps to 25bps from 2Q to 3Q. If you can just help us understand this reduction basis the forward flow rates that you have given across buckets.
Because I see an improvement of course in the first bucket but the second and third bucket largely the forward flow rates seem to be stable. Probably could be a function of the net write back but that will be helpful to understand.
Sanjay Garyali
Okay, sure. So we are first starting with the DTA. So see the overall quantum of DTA is close to about between 380 to 400 crores. Now we are not and you understand that DTA is not necessarily an operating profit. So we are not very pushy about when to claim that dta. We will let it happen in the due course. I am not pushing whether we will do it in Q4 or next year or we will do it in a staggered manner and we are also not focusing on it. But just to give you a quantum that’s close to about between 380 to 400 crores.
Viral Shah
So that’s fine just on that piece. The only reason is that a lot of lenders would typically look at an annual financial and it just helps the balance sheet metrics much better from a rating standpoint. So that was just the only thought process behind this.
Sanjay Garyali
I completely agree with you. I understand that. And we are in. We give a monthly update to all our lenders on the complete P and L including our collection efficiencies and matrices. And if you see that’s where the confidence is coming from and there are some PSUs also which have opened their wallets for us in the last quarter. However, we don’t want to be pushing this because of this reason. So if it happens in due course that’s fine, we will not push the dta. But yes, we are evaluating that. So I wouldn’t say anything further on this.
On the collection efficiencies, the figure that you see in the executive summary is 99.14, which is at a positive. This is average for the quarter. This is average for the quarter. 3. What you see is 99.41 in December. That is 99.41 for the month of December. That’s like quarter ending. The difference between previous and now on collection efficiency, what we have done is we have put it on pause because that is a meaningful way. That’s how the market does it. However, in the annexure we have also put on numbers. So in case you want to refer to the previous, that is also there in the annexure.
So that’s the difference between the two. On the net flow rates, there are two areas where we have seen improvements. See on the first bucket, which is 1 to 30, when we were evaluating ourselves against competition, our flow rates were close to about 35, 30, 35 to 40%. Now we were much better against the industry on this. So we were doing a better job on the 1 to 30. We realized that where we need to do better is on the gross collection efficiency. So that there’s a lot of focus that we have put on the center meeting discipline.
The same day collections, like I have told you, 94% of our entire collections is happening on the day of the demand. So these are the. Essentially the flow back is more or less the same as before. The gross flow forward rates have drastically come down because of which the net flow rates are far better on the second and third bucket. If you see. So there’s an improvement on each of the buckets over the previous quarter on second and third buckets as well. I’ll just give you a. On the graph, if you see there is 5 to 7% improvement on each of the.
Just give me a minute. Raji. Yeah. If you see the collection efficiencies or the flow forward rate in November and December in the 30 to 60 now we are in the range of 65 to 65 and 57 for December, this was averaging about 70 in the previous months, if you can refer to slide number 13 and 60 to 90 is remained more or less same because we think that by 60 to 90, I think we have juiced out everything from the customer. But 130 and 30 to 60 is where you see improving trends over the previous quarter by at least 5 to 7%.
Viral Shah
Got it. This is very helpful.
Sanjay Garyali
This answers your queries.
Viral Shah
Yes, it does. Thank you so much and all the best.
Sanjay Garyali
Thank you. Thank you.
operator
Ladies and gentlemen, to ask a question, please press star and one Now. Participants who wish to ask a question may press star and one this time. Thank you. The next question is from the line of Ashlesh from Kotak securities. Please go ahead.
Ashlesh
Hi sir. Good morning. Two questions from my side. Firstly if I look at this net forward flow rate number for 3Q which was at 25 basis points where do you eventually expect this number to end up? Let’s say when most of the bad loans have been cleaned up that is one. And secondly if you can share what is the outstanding pool of bad loans which were written off over the past couple of years in this cycle and how much recovery do you eventually expect from that pool?
Sanjay Garyali
Okay. Yeah. Yeah. Thanks Ashlesh. So first on the net forward flow. So this has nothing to do with the bad book. This is only the net flow rate is on the current book as we all understand. And the biggest change that has happened is that the leverage on the current book is drastically come down. You are seeing that greater than three lenders on the overall book is close to about 7% or less than 7% greater than three lenders. So one, this has distinctly come down and this will help us get better and better on even the current bucket collection efficiency for January.
I have already told you that we are better than what the average that you see for the quarter. Now I think the way I am looking at it is that even if we continue at about 0.25% of net forward flow and assuming everything else flows forward so in a stable state the way we should look at it is 0.25% translates into approximately annualized credit cost of about 3%. Add another 25 and 90%. 80 to 90% of whatever flows forward will eventually flow into 90 plus. So take about 85% of that. That is about 2.7, 2.65%.
So 2.65% is a credit cost that should be there in decent times and about 50 to 60 basis points when there is a tough scenario. So that’s where I said that, which is about 3.3, 3.4. That’s why I said that the credit cost will range between 3.25 to 3.75% in a stable book on a stable environment. I hope these this answer.
Ashlesh
Understood, sir. Yeah.
Sanjay Garyali
Second one was.
Ashlesh
Sorry, second one was a different one.
Sanjay Garyali
The outstanding tool of bad looks outstanding on the. So total write off is close to about 3000 crores. We have done. I have explained in the previous calls we’ve done a bureau run and we’ve done multiple propensity checks. About 900, 800 to 900 crores is what we see recoverable which means that these are the customers where there are some or the other transactions happening in the bureau or we see some trade lines which gives us a positive sense. We are expecting about 50 crores of recovery in the entire 60 plus. Why I’m saying 60 plus is because the most of the provisioning in our case happens in 60 plus itself.
So I am looking at about 50 crores every quarter. So over the next four quarters I am looking at approximately 200 crores of cash collection which will come from the entire 60 plus. Of which about 85, 90, 90% will come from 90 plus which will be divided between 90 to 180 and the write off. So you can assume that from this quarter which is quarter four onwards for the next one year we are targeting close to about 200 crores of recoveries in the entire 60 plus.
Ashlesh
Just lastly, I missed your opening remarks today. If you can. If you have given the guidance for loan growth for next year. That’s all.
Sanjay Garyali
Yes. Yeah. Which I have already given. You want me to repeat that? Okay. Thank you so much. Thanks Ashlesh.
operator
Thank you. The next question is from the line of Sohail Canali from Ul JK Financial Services. Please go ahead.
Sohail Kanalil
Yes sir. So congratulations on a good set of numbers. So I had a couple of questions. So first one being what is the. Attrition rate in this quarter among the field officers? And the second question was how many. Of the customers of Fusion Finance still have more than you know, G lenders as of Q3. Okay, sorry soil. The second one was fusion plus three greater than fusion plus three.
Sanjay Garyali
Yeah. Okay. Okay. So I’ve answered the second one but I’ll. Okay, repeat again the first one. First I’ll address the attrition. So I have given you attrition figures at a branch manager level are close to about annualized 30, 75% of branch manager are greater than three years. The question you are asking is field officers. Now the way we measure is field officer Greater than six months is close to about a little around 50%. It’s less than. Just little less than 50% and greater than six months on the. Which is how we measure. Because a lot of people less than six months are trainees.
And the book allocation doesn’t happen on the Fusion Plus 3. I’ve explained to you that at a post level now we are subscribed 7%. You remember we used to be hovering around 17 to 18%. Now we are at 7%. So 7% of the entire book at a cost level is Fusion greater than Fusion plus two.
Sohail Kanalil
Thank you.
Sanjay Garyali
And the new disbursement that we are doing, we are shared with you about 80% is just fusion and fusion plus one. Not even fusion plus two. So that is also important to keep in mind. Understood?
Sohail Kanalil
Understood and serious. Thank you very much.
operator
Thank you. The next question is from the line of Maitri from Sapphire Capital. Please go ahead. Hello.
Unidentified Participant
Yes, Maitre, we can. Yeah, could you repeat the disbursement number that we mentioned for January 21st? Sorry Madri, your voice is broken. Did you say disbursement numbers? Yeah.
Sanjay Garyali
Yeah. Any other question you have, I’ll answer them collectively.
Unidentified Participant
Yeah. So from 2017, do we have for next year?
Sanjay Garyali
Okay, so I think the second question you are asking is that against that Aum, do we have an ROA roe target? Is that what your question is? Okay, so is that all? Can I start?
Unidentified Participant
Yeah.
Sanjay Garyali
So Jan, Jan disbursement numbers are little over 670 crores for Jan, which is come from over 1 lakh customer. I think approximately 1 lakh 10,000 customers. The second and 80%. And in MFI, 80% of these customers that we have acquired, okay. 76% of these customers at a POS level are our existing customers and 24% are new on the ROA roe. See, we don’t give a exact guidance on ROA roe. But I’ve given you, you know our names. You can clearly figure out what is the. We have shared with you our margin analysis. You know the income streams that we have.
We’ve given you a sense of credit cost to look at in a stable environment, 3.25 to 3.75. So the only metric that you would want is OPEX. I can tell you confidently that OPEX at a percentage level will significantly keep coming down. The call that we have taken is that 85% of our Opex is people. Now it doesn’t make sense in a falling book. It didn’t make sense to cut down on people and then we would again require people later on. So the call that we took was that how do we utilize our existing people into more productive areas, one of them being collections.
We have a 3,000 core written off book. And that is why we. So there’s a significant number of people we have put behind collections at least for the next one year. So the compensation of let’s say a little higher opex against let’s say a normal OPEX that you would want to see is about 5 to 6%. We will obviously be higher than that. That will be to some extent compensated by the recoveries that we get in the 90s plus or the write off pool for at least for the next one year.
operator
Thank you. Before we take the next question we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Viral Shah from IIFL Capital. Please go ahead.
Viral Shah
Yeah. Hi. Thanks for giving me the opportunity for the follow up. Sanjay, with regards to your collections and the write off that you mentioned. You mentioned that 50 crores of recovery per quarter. This is on the 60 plus portfolio. I’m sure part of this is basically your normal I would say the recovery of an overdue book rollback, all those things that happen out of this 50 crores. What is the exit? I would say or not exact I would say but more likely proportion of recovery from the right of portfolio of 3000 crores if you can help us with that.
And secondly also with regards to your credit cost guidance of say 3.25 to 3.75 does this kind of take into account say the use of the receivable management overlay of around 30 crores given we have used another 15 crores this quarter as well.
Viral Shah
So the second question I let Krishan take on. I’ll just answer your first one on the 50 crore breakup. Like I already explained while this is 60 plus 90% of it which is approximately 45 crore will be 90 plus which is 100% provisioned. Right now we are averaging 30 of which of these 45 crore right now about 13 crore. We are averaging from the ride back for the quarter which we will be taking too close to about 18 to 20 crores. So of 45 crores about 20 crore for the quarter will be right back and the balance 2025 crore will be 90 to 180 recoveries.
For the second question I’ll pass on to Krishna.
Krishan Gopal
So hi Viral, on the credit cost irrespective of management overlay reversal there is an improvement and that should continue as far as utilization of that management overlay is concerned. That is based on the improved flow rates and asset quality. So as we have communicated earlier there is a plan to utilize some bit of it every quarter and however every quarter we take an assessment of this and we will take a call. However our stand is we should utilize it for next one or two quarters gradually the way we have utilized in last two quarters. Having said so there should be, there is, there is a clear cut improvement in the credit cost removing the management overlay and that should continue in the next quarters as well.
Viral Shah
Got it. Thank you.
operator
Thank you. The next question is on the line of Rajiv Mehta from EPS Securities. Please go ahead.
Rajiv Mehta
Yeah. Hi. Thank you for allowing a follow up. So Salisar, when you talk about doing a 10,000 plus crore book in the next year it’s a big jump in terms of where we are right now. So from a funding point of view, how confident are we of funding this kind of growth? And if you can also talk about now at what cost? I mean your marginal cost of funds is running pretty high and it has to come down now. So where do we see our cost of funds broadly stabilizing as we get the benefit of coming back in terms of the overall pnl?
Sanjay Garyali
So Rajiv, I’ll just partially answer your first question and the financial aspect of it I’ll leave to Krishan. See we don’t look at. While you are. While technically let’s say we end this year at about 7,200 7,000 crore and you’re looking at it, let’s say from a 7,000 to 10,200 that’s close to about 40% growth. But I’m saying we should not look at it like that because this is something that the current infrastructure anyway supports. So if you look at our customer base of over 25 lakh customers, 1600 branches, 1450 MFI branches, technically we should be just MFI.
We should be about 12,000 crore of AUM, just MFI. So with the branches that we have maybe we need to just add people at a front end, nothing else. We should be at about 12,000 crore of AUM only on the MFI book. So I think while you see it as growth, I look at it like reinstating or utilizing the existing infrastructure because we have not let a lot of people go. We have not caused any huge anxiety amongst people. And it is hence I realize maybe in hindsight while we were being internally also we were anxious of the fact that we are carrying a high opex.
I think in hindsight we did the right thing because for example you see two quarters back we were averaging 250 crores. I’m telling you we are at 670. That’s two and a half times. But we’re not feeling like that the pressure is not like we have gone up two and a half times because it’s just the people were there, the muscle memory, the way people were operating and we let people be there. And I think that’s worked in our favor. So however, you will see significant buildup on the MSME side the book that you see about 700 crores about 15% of this 10,000 crore will be MSME which means that the MSME will be almost double.
Now this is where we are creating a right to win and we are into completely secured we are only into self occupied residential and commercial and we are very confident that we will be able to offer at a lower credit cost a right to win which will differentiate us from the market. So 15% like I said of the 10,000 crore will be the MSME AUM the rest of the. I’ll just let Krishan do the so.
Krishan Gopal
On the capital front as you can see our leverage stands at 2.2 times and capital adequacy at touching about 39% and this 2.2 times is on the back of like extra liquidity of about 1800 crore. So this number should continue till March when we come to the normal level of liquidity. So these two matrices clearly show that we have a good headroom of growth. The number we talked about the next year and the one more year and this is based on the current levels and I’m not even talking about dta. Some someone of stock touched upon DTA so that is also now we are profitable and this is just a matter of time so so that way we have enough capital for growth without that DTA as well and when DTA comes there is a straight addition of about 2400 crore and as I said that is a just a matter of time so we are not worried on that front and as we have mentioned on the debt side we are already getting sanctions.
We have liquidity of 1800 crore sanctions in the hand of about 1825 crore. So the focus is on the business and the growth and we are getting good support from the lenders plus as I mentioned we have a good headroom. Our leverages have very good headroom plus capital adequacy as well.
Rajiv Mehta
Just one last thing I want to check on was that government sponsored credit guarantee scheme which was supposed to come. Any thoughts is that coming size or something on that?
Sanjay Garyali
So I will let see Conceptually we have agreed that Alokji who’s the CEO of MFIN he’s representing us and he’s sharing that. So anything pertaining to that I think it is. I would deem it fit and proper for him to do the talking but obviously if it comes it’s a great for the industry in what when I think he’s the spokesperson for the industry and he should do the talking on this.
Rajiv Mehta
Sure. Thank you.
operator
Thank you the next question is from the line of Sonal from prescient cap. Please go ahead.
Sonal Minhas
Hi sir, this is Sonal Minas. I hope I’m audible.
Sanjay Garyali
Yes Sonal.
Sonal Minhas
Yes sir. You were talking about recoveries of the order of 200 crores the foreseeable future. What is if I see slide 25. I think the recovery rates are much lower than that on a quarterly basis as we see right now. Am I reading the data right? Just want to understand the numbers first and how that is going to be enabled going further to meet those numbers. Just wanted to understand that.
Sanjay Garyali
So there are two part of recovery. So like I said 50 crore is the total 60 plus and I gave a breakup of that that 50 kore about 5 corros is 60 plus. And the balance 45 crore is 62. Okay, sorry 90 to 180 and the balance is about 20 crore is write off. Now the write off that let’s say I’m positioning right now. So this total number that you see right now against 50 crores is about 3637 crore. Right. And between this the write off is 13 crore for the quarter which I am positioning at 20 crores.
There are certain changes that we have done on how we were. There are some experiments that we were doing in certain set of branches and we’ve been extremely successful and the results have been encouraging. There are some technology changes we have done. We have taken advantage of propensity. There are some AI calling that we have done because reaching out to you would understand this is like 1012 lakh customers. So reaching out to them would have been very expensive. Yeah. So there are multiple. So we have also taken help of AI and actually we were amazed.
We were thinking that the rural customers response to AI would be weaker as compared to urban. We were pleasantly surprised and all of us have listened to a lot of those calls. The I think if we choose the right partner and if we do this right there is a significant upside that we can get rather than you know burning money on hiring people on contact center and warm bodies. So there are. And that’s one of the reasons why the overall cost of collections even in the write off has been hovering around 20%. Otherwise in the market is close to about 35 40%.
So this is what our senses that the the 50 crore backup will come from. And we are. So if I were to give you the January number against this 50 we are very close to let’s say 14. We are about 12 to 14 crore in Jan. So from a And my previous average was 11 crores. So I’m basis that also we are getting confidence that this will be. I’m not saying a cakewalk but 50 crore we should be able to target in about one and a half quarters time. And for the. And this is the average per quarter for the last.
For the next four quarters. So that we will be at 50 crore. So that I’m pretty confident on.
Sonal Minhas
Got it sir. Thanks for explaining this. So going further from a prudence perspective and in microfinance the cycles are the up and down sizes are there after every two, three years. Just want to understand like there is credit which has early provisioning policies just taking them as example. But there may be other more who basically more conservative in terms of provisioning much ahead of time compared to peers in the market. How should we see Fusion going further going ahead from a 23 year perspective? Like is there enough buffer you want to create and provisions from the profit pool so that whenever the next down cycle comes you’re ready and that secures the institution for the next cycle as well From a down cycle.
Just want to understand from a risk perspective how things going to be different for Fusion. Not from a regulatory perspective.
Sanjay Garyali
Yeah, so no. So I think a very, I think very, very apt question. So from a risk perspective the way we are looking at it is that there are two ways of managing let’s say a tough situation or a market or a cycle is that during the good times you. You take lesser risk, you build your guardrails much stronger and you don’t get to. There are all these challenges happens because of the fringe customers or customers who are on the bench and those are the customers who move to let’s say a delinquency during the bad time.
So one is that guardrails have to be much tougher. We have already explained that our guardrails are at least two to three times tougher than what the industry guardrails are. And we’re not using just simple bureau as a baseline. So that’s one. The second thing, if you look at our ECL model it is extremely aggressive. In fact most of the analysts have come back and said that you are over provisioning. We didn’t want to change all this during the year. So you are absolutely right. I think should we between provisioning and ecl let’s say creating fresh management overlay and provision provisioning, should we be creating a buffer? Absolutely.
What you’re saying is right. And. But what it. But both the things cannot happen at the same time. We cannot Take a very high provision. We cannot take a very high ECL and then also provision and create a management overlay. So we have taken a very aggressive provisioning and like. And this was because we had a very tough time last year. We did not want to change it during the year. But I think as a team we will sit down. There are two people who are working on the ACL model. There’s an external consultancy also we have hired who gives us a very fair and an unbiased view.
We will I think at the beginning of the year look at both whether we need to build more management overlay or we need to make the ECL provisioning a little more fairer. But you are absolutely right. So we will take this call in Q1 the moment we are done with Q4.
Sonal Minhas
And so how do you tie this? Just want to ask on this. How do you tie this with growth? Because you have given a growth guidance which is fairly aggressive. So basically just want to understand from a growth come the risk perspective. Is that growth something which you feel is reasonable enough for the risk that you want to play with.
Sanjay Garyali
Okay, great. So I think let’s break this down. The growth is coming from. Where is the growth coming from? The one we are seeing that the MSME book will almost double currently 720 will go to 50.
Sonal Minhas
Yes.
Sanjay Garyali
Yeah. Is that risk? Obviously the risk is much lesser. Why it is lesser because it is completely secured. The LTVs are far protected. Our book LTVs are close to 55%. We are not. We are not. And we are very, very clear on what kind of properties and what kind of risks we will take. We are not taking any cash flow risk there. The only risk that we are taking is on marketable properties. So will we create so 1500 crore a book? Let’s say 700 to 1500 crore will be a far less risky book. The second part is that MFI going from let’s say 6500 or 6400 to 8600.
Like I said, I don’t. We should not see this as real growth because we did not cut down on branches. We did not cut down on people. And I’ll just give you a number. We did 670 crores out of which about 35 crores is MSME. 630 crore is MFI. Now the question that you have to ask is that for next year if I have to do let’s say 8,000 crore or disbursement from MFI 650 crore my this month number or 630 crore will take me to 7,500 crore. Do you think going from this number to let’s say 720crore average for next year is it really growth? Is it an aggressive growth? Okay, I think that’s the.
So maybe it is sounding good to you. Because the first two quarters were like really. First quarter was like really down. We were less than thousand crore disbursement. And there was a huge runoff because of the book quality or the previous book that we had acquired. That’s why you saw the book deterioration happening very quickly.
Sonal Minhas
Got it.
Sanjay Garyali
Thanks.
Sonal Minhas
Thanks for listening, sir. I’ll fall back in the queue. Thank you.
operator
Thank you. The next question is from the line of Abhijit from Modilal Oswal. Please go ahead.
Abhijit Tibrewal
Yeah. Good morning, sir. Thank you for taking the question. So please let me know in case these questions have been answered. Firstly is. I mean today we are seeing an increasing propensity of LFI lenders to go for cgfn. So our thoughts around that. I mean is there a portion of our portfolio which is guaranteed under CG economy? And if yes, what is the proportion? If not, how are we thinking about it? The other thing is incrementally we have seen MFIs talking about taking some hike in lending rates. So what are our thoughts there? And lastly sir, today when we meet msis right.
We see a certain acknowledgment that hey mfi, while the group lending will continue basically in jlg, the group it will continue. But joint liability is something people don’t sound very confident about going forward. So if you could just share your brief thoughts on these three questions.
Sanjay Garyali
Okay, great. So credit guarantee we are evaluating. But we have not yet enrolled. None of our book is right now on our credit guarantee. As and when we close that. But we are evaluating it. So as and when we close we will come back to you on the lending rates. You are right. I think most of the industry has increased lending rates by 100 to 125 basis points. We have not increased lending rates in the last one quarter. We are evaluating the situation and our audit. There is a pricing committee which clearly has put about 75 to 100bps.
Which is a window available for us to increase. The decision is on the table. Not taken yet. But there is a play of about 75 to 100bps on the interest rate which is available to us. If we compare against let’s say whatever the industry or the market is. When do we do this? We are evaluating this. The decision is on the table. I Think there are one or two more external things that we are looking at basis which we will eventually take a call. But yeah, we will take a call by end of this quarter on the jlg, I think the group never had a liability.
However, if you look at it, there was a nudge by the rest of the lenders and they would support her. Whoever lets any one person in the group, you would support her. I think the thing that we are observing is that depending upon how we acquire the group, the group will stay together versus not stay together. So let’s say the center members, how close are they to each other from the where the center meeting is happening? So we have kept a certain distance of let’s say less than a particular distance from the center meeting. Are we getting homogeneous customers on board in a center? Are there customers with very different leverage backgrounds? How is the entire center being looked at? Is there some reward the center is getting for let’s say a center attendance discipline? So there are multiple things that we are working on and I think it is getting complex and complex.
But I don’t see. And when I talk to some of my peers, mid and large both, they also see significant value in JLG concept continuing. But I think with the use of technology and I explained to you that our entire LOS and LMS we are upgrading to a very modern system. It will be operational by May of this year. I think that will support a lot of GLG which is right now too much of dependence on the front end. So that heavy lifting that the front end person has to do that will move on to technology and system.
And I think we will be able to give you a clearer picture on this by end of the quarter. We are already undergoing implementation in certain set of branches. I think we will be ready with progress when we talk about in the next quarter.
Abhijit Tibrewal
Just one last follow up. When I look at this thing that you put out on maybe slide 11, the book composition, what is unique to fusion? Fusion class one, fusion plus two. Do you think given that the propensity for you as well as the industry now is to come out with pre approved loans. Right. Try to see that if you have a good borrower, you try to take care of most of her borrowing needs. You think this proportion of unique to Fusion infusion plus one going up in the coming quarters.
Sanjay Garyali
So I think I think unique to Fusion will definitely continue to grow. So right now we are at about over 40% unique to fusion. There are a lot of initiatives that we have launched around this customer. You’re absolutely right. I think this is very similar to any other NBSC or bank that you look at. There’s a certain loyalty around existing customers. Anybody who’s let’s say catering to just one customer. I think the only thing that we have to be aware that there can be an over leverage on getting, let’s say lending too much to your own customer.
Also though there is a challenge and hence the selection criteria is very critical. But you’re absolutely right I think and we are working around how we can use technology to give more value add to this customer. Because if she is relying only on Fusion and let’s say the criteria that we said are let’s say similar to Fusion plus one and Fusion plus two, then we are doing a gross injustice to her and not giving her enough reason to continue to stick to only Fusion. However, if we take the entire risk, something happens in the family, the entire risk will be borne by us.
That’s also a challenge. So there’s a. This is not an easy thing and that is why I said that I think this is as complex as any retail finance and I think all of us are realizing that the involvement of credit in the entire JLG and microfinance is very different than what, what it used to be, even what about a year back. So you will see significant focus on this. I don’t know what this percentage as a number should be but yes, we are very cognizant of the fact that certain set of customers should only rely on Fusion for everything.
Abhijit Tibrewal
This answers all my questions. I wish you the very best.
operator
Thank you ladies and gentlemen. That was the last question for today. I now hand over the conference to management for closing comments. Over to you sir.
Sanjay Garyali
Yeah, thank you. So I think first at the outset, with great humility, I would like to thank all the stakeholders, each one of you. I think we’ve been through the entire industry and Fusion has had been through a very challenging, challenging time. While the internal teams have been rallying around to get Fusion to this level, I think each one of you on this call, your involvement, your guidance, your inputs have helped us hugely and we will continue to bank upon you for advice. So with that I would like to thank each one of you. I think it’s been a very, an amazing two way communication with each one of you and I’m absolutely sure that the Fusion that we are building from here on will be able to take bigger challenges than what the industry has witnessed in the past.
So thank you so much.
operator
Thank you on behalf of Fusion Finance Ltd. That concludes this conference. Thank you for joining us. And you may now disconnect your lines. Thank you.