Fusion Micro Finance Ltd (NSE: FUSION) Q3 2025 Earnings Call dated Feb. 13, 2025
Corporate Participants:
Smit Shah — Investor Relations
Devesh Sachdev — Chief Executive Officer and Managing Director
Gaurav Maheshwari — Chief Financial Officer
Analysts:
Shreya Shivani — Analyst
Abhijit Tibrewal — Analyst
Ankit Surana — Analyst
Chintan Shah — Analyst
Pranav Gupta — Analyst
Zakir Husain — Analyst
Srijan Sinha — Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Fusion Finance Limited Q3 and Nine Months FY ’25 Earnings Conference Call.
As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Stard on zero on your touchtone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr Smit Shah from. Thank you and over to you, sir.
Smit Shah — Investor Relations
Thank you, Nirv. Good morning, everyone, and thank you for joining us on the Q3 9M FY ’25 results conference call of Fusion Finance Limited. From the management today, we have Mr Devesh; our MD and CEO; Mr Gaurav Maheshwari, CFO; Mr Sunil Mundra, COO of MFI Business; and Mr Dipak Madan, Company Secretary and Chief Compliance Officer.
Before we begin, I would like to remind you that certain statements 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 FY ’25 results presentation that has been uploaded on the stock exchanges and company website.
I now hand over the call to Mr Devesh — Devesh sir to begin the proceedings of this call. Thank you, and over to you, sir.
Devesh Sachdev — Chief Executive Officer and Managing Director
Thank you very much. Good morning, everyone, and thank you for joining Fusion’s Q3 financial year ’24-’25 results conference call. Am here a lot.
Operator
Ladies and gentlemen, please stay connected. The line for the management dropped. Participants please stay connected while we rejoin the management back to the call. Ladies and gentlemen, thank you for your patience. You have the line for the management reconnected. Sir, sorry to interrupt you. If I may request you to proceed from the beginning, please.
Devesh Sachdev — Chief Executive Officer and Managing Director
Thank you. Good morning, everyone, and thank you for joining Fusion’s Q3 financial year ’24-’25 results conference call. I am here along with my colleagues, Sunil, the Chief Operating Officer for business; Gaurav, Chief Financial Officer; and Deepak, Chief Compliance Officer.
We were among the first ones in the industry to recognize and acknowledge the building stress at the beginning of this financial year. In accordance, we proactively and swiftly took several initiatives to address the issues and mitigate the impact. During the last earnings call, we had spoken about them in detail.
I would now like to update you on some positive outcomes of these steps. Due to our well-thought-out initiatives across sourcing and collections since Q2, early green shoots are now clearly visible in terms of business improvement across various parameters. Firstly, as highlighted in the previous quarter’s earnings call, we have been following very stringent credit criteria, even tighter than existing MFIN guardrails.
Due to tightening of underwriting norms, we are observing building up of superior quality portfolio since August ’24 and have also seen a moderation in AUM, which now stands at INR10,599 crores. What is most promising is that we have seen meaningful deleveraging in our customer-base.
I would request you to refer to Slide number nine where we can see a significant downtrend in shares of Fusion plus greater than equal to three and Fusion plus greater equal to four lender bucket within our customer composition from March ’24 to December ’24. So about 80% of our clients fall under Fusion plus less than equal to two lenders bucket as of December ’24. And we expect this share to increase further over the period. Therefore, there will be minimal impact of new MFIN guardrains to be effective from April 1, 2025. In Fusion plus less than equal to two lenders customer share was 79.3% in December and now versus 68.4% in March ’24. There has also been a reduction in overall outstanding loan exposure of our customers with about 50% customers having total MFI loans of — up to or lower than INR60,000 as of December 2024.
The lowering of customer debtness will ensure that our portfolio remains healthy. This decade, there has been a consistent improvement in net flow rates month-on-month across all DPDs. You will see that since October, the net flow rate from current to par 1 to 30 has improved by 200 basis-points. This is also evident in our net collection efficiency of current portfolio, which has been improving month-on-month and has risen to 97.7% in December ’24 from 96.1% in Q2 financial year ’25. We continue to focus on solvency and ended the quarter at 22.2% capital adequacy ratio, which would be 30 plus percent if you pro for pharma for the INR800 crore rights issue plant, further strengthening our balance sheet.
Our liquidity position has been further enhanced since December with INR400 crore of incremental liability raised till-date in Q4 ’25. This quarter, we have also significantly enhanced our provision coverage across all stages with coverage on Stage 3 loans increased to 88% in December ’24 from 76% in September ’24, which has helped bring our NNPA down to 1.7% from 2.4% in the previous quarter. More specifically, we have not recognized interest on Stage 3 loans and prudently reversed all deferred ex assets accrued till-date.
Few important points to note here are, the reversal of DTA is a non-cash item and does not impact capital adequacy or cash flows. If you refer to slide number 10, you will see that our PAT at a normalized tax-rate would have been, you know, loss of INR380 crore if you apply the standard corporate tax-rate on the PBT. I would also like to inform you that we have successfully obtained waivers from majority of our lenders for covenant breaches. It is encouraging to see that our lenders continue to have complete faith in Fusion and its sound business and governance fundamentals. The company has received waivers from all lenders except file lenders for borrowing amounting to INR939 crore, representing only 10.84% of total borrowings as of December 31, 2024. We have been engaging constantly with remaining lenders and are confident that there will be no demand for immediate repayment of borrowed funds.
Our MSME vertical has shaped up well over the years and we now believe that it is at an inflection point. The portfolio is growing at a good pace and the quality continues to be healthy. Of the INR630 crore of AUM in nine months financial year ’25, the share of secured loans is around 85%. We have significantly haunt our underwriting capabilities in this vertical and we are confident that we can bank upon our MSME portfolio to become a key pillar in our future growth.
We continue to strongly focus on leveraging technology to improve our understanding of the customers and engagement with them. We are heavily leaning on risk analytics and data analytics to understand our customers in a more nuanced way, so that we can engage with them in a more meaningful manner. Further, we continue to invest on enhancing our technology framework. We had earlier in this financial year introduced our LOS and LOS platforms in those built-in-house for our MSME vertical. And now we are also started our journey towards building or making a hybrid module for microfinance vertical in this — in the coming financial year.
It is important to note that going-forward with strong industry-wide guardrails, the microfinance customers may feel credit squeeze for some time, but it will have a good impact in the long-run. I must acknowledge that with shifting customer behavior and market dynamics along with various technology options, the color of the industry is also changing. This calls for modifications in our outlook and processes too. We are certainly adapting with these changes and we’ll continue to do so.
I would like to reiterate that we have always believed in maintaining transparency while being agile in our strategy and actions. As a result, we have achieved many significant milestones during our journey of 15 years. We have also faced many difficult sector-wide situations, but have come out every time. Let me reassure you that this time is no different than others. The implementation of guardrails, focus on prudent underwriting, portfolio monitoring and enhanced recovery mechanism is expected to act as a stabilizing force in the coming quarters. These measures are already yielding results in controlling incremental stress and ensuring discipline.
While we continue to closely evolve the situation, we would — we should start seeing stabilization from Q1 2026. Once that happens, we strongly believe that our extensive network, strong customer connects, solid reputation on-the-ground, an extensive rule of focus as well as experience will enable us to steer the company towards a sustainable growth. At this stage, we remain cautiously optimistic and continue to be prudent and watchful in our approach. Thank you very much.
I now hand over to my colleague, Gaurav.
Gaurav Maheshwari — Chief Financial Officer
Thank you, Divesh. Good morning, everyone. First, I would take liquidity and cost of fund for three months-to nine months — nine months ended for financial year ’25. In Q3 FY ’25, we have raised or amounting to INR395.18 crores, including INR95 crores of direct assignment. Till nine months, we have raised INR4,450 crores, including INR1,010 crores of direct assignment. As of December 31 December 2024, our liquidity stands at INR1,151 crores and we have sanction in-hand of INR1,250 crores. As of yesterday, the liquidity stands at closer to INR1,400 crores.
I would like to refer slide number 27 on static liquidity position where we have — where we have given a position that for the next six months, if we don’t get incremental money from the from the lending side and we get only INR400 crores as a rights issue amount in the March. We are still very well-positioned for the — for the cash-flow perspective. We are maintaining a healthy capital adequacy ratio of 22.20% as of December 31, 2024. This will further improve post infusion of capital through rights issue. We have received continued support from lenders by way of extending the combination of breach of financial covenant. We have received 83% of the waivers out-of-the amount of INR5,617 crores. These are the breaches which got breached as of — as on 30th September 2024. As on December ’24, we are in reach of financial covenant amounting to INR5,288 crores. As of yesterday, we have received waiver amounting to INR4,145 crores, crores are from — from a couple of lenders where they have extended till Q3 and Q4.
The company is in discussion with the remaining lenders to obtain combination of the breaches. As of date, none of the lenders have issued any acceleration notice to the company. Our marginal cost of fund stands at 10.15% for nine months FY ’25, which is a reduction of 43 bps on a year-on-year basis. The average cost of fund stands at 10.21% and it has decreased by 32 bps on a year-on-year basis. The Nine-Month NIM ended at 10.66%. It has decreased by 44 bps on a year-on-year basis. The reduction is largely pertaining to interest reversal on account of write-off and non-recognition of interest on Stage 3 asset.
The cost-to-income ratio stands at 47.38% in nine months FY ’25. If we adjust this cost-to-income ratio to for interest reversal, the cost-to-income ratio would come 43.1%. The operating cost has increased by 151 bps. It is largely contributed by split of MFI branches and opening of five MSME branches. As mentioned in Q2 FY ’25 investor call, increase is due to change of incentive structures, strengthening of collection team and rationalization of client per field. It also has a contribution because there is a degrowth in the portfolio. As on December 31 December 2024, the pre-provisioning operating profit is INR646.36 crores. The company has made ECL provision of INR572 crores in Q3 and INR1,615 crores in nine months FY ’25.
Please refer Slide number 11 of the presentation. The coverage of Stage 3 has been increased from 76% in September to 88% in December 2024. This includes management overlay of INR59.50 crores. The coverage of Stage 2 has also been increased from 60% to 72% in December ’24. Similarly, the coverage of Stage 1 has also been increased from 1.84% to 2.68% in December 2024. The coverage of Stage 2 and Stage 3 is 84% and the company has derecognized interest on account of write-off and on a prudent basis did not recognize the interest income on Stage 3 asset. The amount is approximately INR95 crores to INR98 crores. The gross NPA stands at 12.58% and net NPA of 1.71%. Thank you.
Questions and Answers:
Operator
Sir, shall we open the floor for questions. Thank you very much. We’ll now begin with the question-and-answer session. Anyone who wishes to ask a question may press R&1 on the telephone. If you wish to remove yourself from the question queue, you may press R&2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press RN1 to ask a question. The first question is from the line of Shivani from CLSA India. Please go-ahead.
Shreya Shivani
Yes, thank you for the opportunity. Good morning, everyone. So I have — I have two questions.
Operator
Please unmute your line and go-ahead with your question, please.
Shreya Shivani
Hello, can you hear me? Hello? Hello, hello.
Operator
Can you hear us?
Shreya Shivani
Hello, can you hear me? Hello?
Operator
Yes, we can hear you now.
Devesh Sachdev
Yes, yeah.
Shreya Shivani
Okay. Okay. Thank you. Thank you for the opportunity. Good morning, everyone. So I have two questions. First is on the — now that we are at a certain level in terms of our collections and we’ve been making efforts on the collection side, etc. And we’ve slowed down our disbursal also. So going ahead, what is our outlook on how long will we take to stabilize our collections and efforts so that our disbursals pick-up? What will be our outlook? What should we expect for 4Q, 1Q onwards? That’s my first question. Second is on the branch — branch level activity. So we heard that the loan officer attrition has been quite elevated in the industry, which is something which happens during times of stress. So can you help us with what is the attrition number for our loan officers and our branch managers and what efforts are we making towards stabilizing our branch operations and employee performances, etc.
Devesh Sachdev
Yeah. So I will — thank you,, I will answer your first question where look, we are right now because of this challenge which we have faced and the overall operating model needed a certain tweak. So we have been working on it. We starting from the onboarding of customer, credit underwriting, collection, looking at the whole process, looking at how do we look at KYC. So I think we have — this is a — we have used this time to really look at every aspect. So — and then there is a — you can see that there are buckets which have and with this customer in the past also comes back because they know that there is a credit bureau record, they would like to money is required, there is always a demand, but it needs a lot of effort, a lot of follow-up. Right now, our effort is — it’s not that we have — we are consciously, you know, saying that, no, no, we will not disburse. It’s just that the whole-system is getting acclimatized to the new credit underwriting norms and the rejections and everything.
So I believe that it’s this will continue for another one or two-quarter and then I think you would see us coming back because we have 1,400 branches and we have the team experience. So once this — all this the new changes which we have done, the whole-system gets acclimatized and there’ll be some overall you could — you can also see that there are branches where the parts — wherever part is high, we have — are going very slow. We are just going with our existing customers. So all that once we see the — that those branches also coming back. I can give you a simple example, like you see Punjab has been — you remember last year, we faced a lot of challenges in Punjab. But Punjab for the last now, eight, nine months has been doing very well and we are thinking of starting some of the branches where we’re not doing disbursement the — you know in this quarter and start slowly with adding new customers. So I think the idea is that we remain focused, we remain prudent. Overall, there are many changes which happened including the guardrails. You can also see that overall — overall customer is coming down.
So I think we would like that this whole phase where there’s a lot of consolidation is happening, once that we pass-through this keep a very-high focus on collection. I think and with the kind of network we have, we can always come back-in terms of our strategy to grow. So I think — but I still believe that it will take us another one or two quarters before we start looking at very actively on the growth. I think by the time team everything will settle down.
Now second, your — your point on the attrition. So you are right. I mean, so if you remember even in the last call, we have mentioned about many steps we have taken. So starting from changing the whole — if you see one important thing is because there are many customers where you still have to do door-to-door. So what we have done is we reduced the load of the field officer. If you remember at one point of time, we had around 550 customers being handled by a field officer, it has now come down to around 400. So that is one big change we have done. A lot of support, lot of collection support is being given In branches where there are high 60 plus numbers, there is a separate team for doing collection. Incentive structure has been changed. We have providing extra facilities for them in terms of mass facility. We are for a new journey for the first three months, there is no target. We are giving a fixed incentive. So — and then continuous employee engagement happening.
So I think we are — you’re right, we have seen very-high accretions, especially in August, September. But now what we see is that there are some, you know overall it is — it is coming — attrition is coming down, but still remains high. So I think we are still — we still believe that you know it has lot of work needs to be done to make sure that we are able to retain people. A lot of challenges are not because we have not taken step, but also because of the whole environment has become slightly challenging. But I think we are — our HR teams and we have a ground team — HR team also at the ground and we are continuously trying to source stain people and try to engage with the people. But I think we believe that we will be able to now some green shoots we have seen if it from — if I look at from August to November, December, it is slightly coming down. But I hope once this challenge overall stability happens, the people retention rates go up.
Shreya Shivani
Okay. Got it. Sir, just a quick — so how much was the attrition in August, September? Was it more than 50% and has it come down under 50% right now? Is that?
Devesh Sachdev
It has come down to under 50% now.
Shreya Shivani
Okay. Okay, perfect. This answers my question. Thank you and all the best.
Operator
Thank you. Next question is from the line of Abhijit Tebrewal from Motilal Oswal. Please go-ahead.
Abhijit Tibrewal
Yeah. Good morning, everyone. Thank you for taking the question. Sir, first thing on the rights issue, you have already published an update in your presentation that said the approval is awaited. But just trying to understand if you can give some more color on beyond SMB approval, right? What is it that we are waiting for? Is it I know there is a new CEO appointment that we are waiting for or is it that I mean among the two promoters that we have, I mean either one is not very keen to subscribe to the rights issue. Basically what I’m trying to understand is in your presentation, in March, you have shown that we will get around INR400 crores part of the rights issue. So just trying to understand the thought process, whether this will be in two tranches of INR400 crores each or how should we do that?
Devesh Sachdev
Yeah. So yes, we clarify — so first we clarify it even last-time that this INR550, we made it to INR800 crore and with — and also when we looked at the advice we get from our bankers and this is the right overall structure. And then — and if you write — now hindsight, if you see, I think 800 was the right decision, we — in — even if we get first — in the first tranche, the INR400 crore, I think our capital adequacy will start touching around 25%. And then we will have a next tranche available to be called anytime up till so that is that is there. So there is no hesitancy in terms of putting money. There is no other thing which is in our mind or anything which is going on. We are waiting for, say, we have got approval from both the stock exchanges, MSC and BSE. We are — we — even two days back, we got some queries from SEBI and as soon as — and we are hopeful that very soon we’ll get the approval from SEBI and will and then this is — we will get over with it. So there is no hesitancy. We are not waiting for any other thing. It is just to seasonal regulatory approval is awaited from SEBI.
And then you said that, no, it’s not that we are waiting for the new CEO to join and all that. So I don’t think it has anything — any link to the to the rights issue. That’s a parallel process which we are running. And as whenever we have a development, we will — we will definitely share the fair share with all of you.
But let me again reiterate, there is no hesitancy of from the promoters to put money or any other reason for delay, it is just that we are following all the process, our bankers are working and we are awaiting the approval.
Abhijit Tibrewal
Got it. Thank you, sir. And sir, the second question in my head was just trying to understand, we have already put out the zero bucket collection efficiency and which seems to have improved in December and slightly again in January, you have called out in your press release only green shoots that you’re seeing. But just trying to understand, I mean, today when we speak to MFI companies, we get sort of mixed reviews in terms of the status, which is there on-the-ground in Feb 2025. So if you can give some more color on that. All that I’m trying to understand is whatever we have seen until January, are we now confident that this is a trend or is it something that needs to be monitored over the next couple of months before we can be confident that this is indeed a trend and we will see things improving. And sir, a question related question for sir here is, given where we are today, are we now in a position to kind of call-out how much of credit costs which will be required in this credit cycle?
Devesh Sachdev
Yeah. So I’ll first answer, look, I will not like to, you know, to comment on anything about competition. But I can only tell you that we are only presenting what we are seeing. We were the first one to call-out in Q1 when we saw that there is some sudden flow rates, which have gone up and now it is very clear that it has happened in the sector. We are very confident and if you can see that we took huge steps you know to really addrest this and it is now very clear and green shoots are visible. And even if I — I can tell you one more data that the new sourcing which we are doing, which we — we changed in the middle of August. And now when I look at it’s a five-month MOB, the — though it is too early, it’s just a five-month MOB. But, the numbers are that the infant or we could early delinquency is clearly showing trends which we have seen in year 2022, ’23. So — but you know, the idea is that we remain cautious because we want to see at least one or two, three more months-to remain confident and look, all the buckets, I can also tell you that we are seeing even our February up till now is better than January.
But as a prudent company, we would like that, you know, we see this through two, three months-to really then form opinion that look fine, now we can get back to this thing because there are there other balls in the air. There are certain geographies where still lagging. If you refer to the slide number 8, there are even — you see Tamil Nadu or for that matter,, some top-five states, that’s the biggest — the challenge we faced was because two, three large states for us in top-five have faced challenges. So we remain cautiously, as I mentioned in my commentary, optimistic. But the overall trends which we are seeing, even I’m talking with confidence till yesterday are encouraging. And Gaurav?
Gaurav Maheshwari
Abhijit, to your question on the credit cost, I think most of the plan is being taken. But having said that, the evolving situations are happening in the microfinance sector, we are just — we are just taking a stock of it. And obviously, the effort is to get all the things done in this financial year. So that is the way we are looking at. And if you see, if we have gone as per the ECL of September, our loss would have been far, far lower without the interest reversal and the DTA. But having said that, the quarter which we have used for increasing the coverage across stages, so that the impact for the new financial year would be very minimalistic and we can start a fresh from Q1 onwards.
Abhijit Tibrewal
Got it. And Gursh, sir, in your opening remarks, you have shared the quantum of interest income, which has been written-off in interest income, which has not been recognized on Stage 3 assets. So if you can share that again. I’m just trying to understand, I mean, until Q2, we were accruing interest income on Stage 3. This quarter, we have stopped recognizing interest income on Stage 3 assets. So I mean, if you can just explain any clarity.
Gaurav Maheshwari
It is all done in a way that if we are potentially, if there is going to be any write-off in Q4 of — because gross NPA [Technical Issues]
Ankit Surana
Slow also because. The portfolio has got slightly degrown, so the denominator impact also. But that’s. How the number is. Just one. Follow up on the first question. On these return of borrowers. Are you able to identify them, meet them, or have they completely abscond?
Devesh Sachdev
No, I think it’s a mix of that. You are right. There are around 1520, 20% where we see. That customers have also migrated, and then there are customers who have changed their. Numbers and contractability in the shoe. But there are customers where we are able to. We are meeting and we are seeing to them. We also look at data scrubs where whether this customer, how this customer is behaving with others? If there is a payment which is being done to others, are they current with others? Or any other bucket. So we look at all that and accordingly, the strategy is made. But broadly, I think what we can see is that there has been a pain and we see some customers even coming after one. Year, two years to pay because they are not able to take further loans.
Overall, at a sector level. Also, there is a huge. Consensus. On that. We should not be doing anything. We’ll default because you must have seen. The guardrails where they’re even talking about 60 plus. I think that also should help when the customers will not be able. To get the money. From any other source. They will come and try to settle their account, but I think it’s. A mix of that.
Ankit Surana
Just one last one. The proportion of borrowers which are shared across buckets. Fusion plus two plus three plus four. Can you also share a proportion by value of the exposure? That’s all those were on. The questions. Thank you.
Devesh Sachdev
Okay, we will. Share with you separately. We don’t have right now, but we’ll share with you. Separately. Okay. You will reach out our team separately. Thank you.
Operator
Next question is from Lano Chintansha from ICSA securities. Please go ahead.
Chintan Shah
Thank you for the opportunity. I just met that number on entrance reversible.
Operator
Can you hear us? Chintan, can you hear us?
Chintan Shah
Yeah, sorry. I just missed the number on interest reversal, so could you please just quantify the number on. Address reversal for Q three and nine months. And is it that we were not. Reversing the interest on Bhise three in q two and q one, so, yeah. Please, some clarity on that.
Devesh Sachdev
As a prudent practice in this quarter. What we have done, we have done. You can say. The derecognition of interest. On the stage three asset in q three. And obviously there was in q two, q one where we have also deregognized, because if you see. That once you do a write off in queue q four or q one. So. There would be an impact on the P and all. So that is why we. Have taken a prudent call to reverse. And on the mpa asset. So that it should not have that impact on the PMS. Impact is minimal.
Chintan Shah
Yeah. Earlier. It means that even if the account slipped into stage three, We were not reversing the interest. We were considering the interest. In the interest income. Is that understanding correct?
Devesh Sachdev
Yeah.
Chintan Shah
Okay. So, sir, what would be the total quantum, total amount of interest dividing 95 to 98? Crores you mentioned, was that the number of interest reversal in q three or. Yeah.
Devesh Sachdev
No. So. It’s a combination of a right off and the interest derecognition. Okay, so that would be total 90%. Just the amount. Basically the interest income reversal from stage. Three account in QG. If you could just share that number, which had an impact on margin.
Gaurav Maheshwari
We’ll share you separately on that.
Chintan Shah
Sure. Okay. Thank you. That’s it from my sector.
Operator
Next question is from the land of Pranakupta. From Aonia Salpha. Please go. Ahead.
Pranav Gupta
Yeah. Hi. Good morning, and thanks for the opportunity. Just a couple of clarifications before the questions. Wanted to check when you mentioned current book collection efficiency, what is the exact definition that we are? Using in terms of what is the denominator? And numerator include.
Devesh Sachdev
Yeah, so. Basically where we are saying is that book, which was current in the month of October. How much out of which how much people have paid in November. So this is basically current book. Behaving every how it is. Because that was the basic issue. Because from a current. The loans are going into one DPD and then flow rate. That’s what we are. Trying to show here that even you look at. The new loans. Current customers going. To power one to 30 and from part one to 30. Going to 30 plus. That both. Where we have been able to see a huge improvement. That’s what we have.
Pranav Gupta
Understood, sir. So also, just another clarification. I think Gorosa mentioned that marginal cost. Of funds were about. 10.1 if I got the number right. If I look at the PPT, it sort of shows that margin cost of boring is at 11.3. Is there an understanding?
Devesh Sachdev
I was talking about on a nine month perspective. And I think you are looking at on a Q three standalone perspective.
Pranav Gupta
Understood. So q three number is at 11.3% in terms of marginal cost of funds.
Devesh Sachdev
Yeah.
Pranav Gupta
Understood. Sure. Just a couple of questions. Now that the clarifications are away in terms of interest reversals. So you mentioned. That 98 crores is the number. That we reversed in this quarter. But if I look at our interest income, it’s seen a sharp fall and it seems. That the numbers. Would have been higher than. What we mentioned. Even if I talk about. The cost to income ratio that you mentioned, excluding the interest reversal. So maybe. There’s some understanding gap from my end. If you could clarify that as well, that will be very helpful.
Gaurav Maheshwari
Pranag if you see that over the last six to six months, There is a degrowth in the portfolio. So obviously. There is a lesser interest. Because there is a portfolio which is getting running down and it is going out of the portfolio. And so the interest income is slightly getting lower. Apart from that, the call which we have taken on because that 95 to 98 crores includes the right of also. And if you see that we have done a write off in Q two also. So I think it has two or three. Impacts. One is the write off. Second is the interest reversal call, which you have taken in. Q three. And apart from that, if you see the degrowth in the portfolio in last six months,
Pranav Gupta
So absolutely understand the degrowth bit. No doubts there. It’s just that the debt if you just compare, say, q two versus q one and q three versus q two. Obviously we’ve. Seen a portfolio growth even in Q two. But it seems that we haven’t reversed any interest in Q two itself. So I wanted to get clarity on that bit.
Gaurav Maheshwari
No. We have derecognized the interest on stage three in this quarter only. In Q two. We have not done that, only what we have dehumanized in q. Two was only on the account of write off.
Pranav Gupta
Okay, sure. And if you could just quantify the interest reversals in all three quarters or. Maybe nine months that will be paid.
Shreya Shivani
Yeah. So, Pranav, as I mentioned in the earlier question. We can deal this in a separate discussion, or you can just write it to the investor relations. You can just respond on that.
Pranav Gupta
Sure. And just one last question. Could you give out the rationale on the DTA reversal this quarter, especially given that. This quarter itself also was a loss. Just some rationale there.
Devesh Sachdev
So basically, if you see are not to count point number seven. Which has been. We have clarified. That. There is a note on going concern and it is linked. To and as metro of students we have under accounting indian accounting standard as well. This has been done. So we have clarified that. And also, as soon as in medium term, we start, our balance sheet turns back to black. I think we can always accrue this, so it’s more of an accounting. Entry and it is a non cash item and it does not impact anything else. But we have clarified in the notes to account in point number seven.
Pranav Gupta
Sure. I have no questions. I’ll join back in the queue.
Operator
Thank you. Next question is from Nano Zakar Osan from Au Small Finance bank. Please go ahead.
Zakir Husain
Hello. Good morning, everyone. I just have one question. Out of top ten state. Which state are worst hit in terms of collection efficiency?
Devesh Sachdev
The student. I’ll tell you because. We have mentioned this in our if you look at the slide number eight, if you. See, Tamil Nadu and Udisa are still lagging behind that I also cover. That these two states. Even Bihar. See, from November it has started picking up, and in January also, it has more or less. It has not shown much improvement. It has not shown improvement from December. But I think. These Tamil Nadu and Ulisa are two states where we are still seeing some kind of lag. It is coming up. We are doing efforts, but I think it’s still, still lagging. From the other states in the top five.
Zakir Husain
Okay. Thank you.
Operator
Thank you. Next question is from Nanos regents. From future Gen. Rally. Please go ahead.
Srijan Sinha
Hi there. Was just wanted to understand on this effort tax asset bit once again. So when we have not recognized the, we have not taken the benefit of the negative tax credit. That. We would have bought this year when we turn profitable next year. Does the accounting imply that we will have a zero Pl taxation next year and thereby a CBT? Is equal to. Pat and which will inflate your Roa and Roes. Is my understanding correct on the accountant treatment?
Devesh Sachdev
Yeah, you’re absolutely correct. Sweden. What we need to understand here that why, as device has mentioned, is earlier remark that. As today. There is a covenant breach of a lender and. As per India’s one. So you need to have a certainty of a cash flow for a one year. But most of the lenders where we have got the. Condolation of the breaches is still q three, q four. So auditors are pointing out that there is a going concern issue. And consequently. There is no point continuing DTa once it turns out into a blag. Whether it is q one. So you can immediately recognize the dPA benefit and. You can just take the benefit in the coming years.
Srijan Sinha
Okay, fair enough. But what change between Q two and K three because the same comment was there in Q two results as well, right?
Devesh Sachdev
No. So if you see from a log standpoint, yeah. So the loss has increased in this. And obviously, there would be a taxable loss for this year, so as a prudent basis and as per India’s twelve also. If. There is a you can say. Certainty that in the coming one or two quarters, you are not going to have that. Prof. It’s prudent. To reverse that DtA.
Srijan Sinha
Fair enough. My second question, Nirav, is on interest in the vertical. Just needed a clarification out there. So if you were to hypothetically, let’s. Say right off the entire 1200 crore of the stage three assets. Does that imply that you only have to provide for the unprovo portion, which is actually 1112 percent, and there’s going to be no interest income reversal on that pool.
Devesh Sachdev
Going forward. If I do a write off of my stage three, then there would not be any interest reversal going forward from that particular asset. So the entire crore.
Srijan Sinha
The interest reversal up to December has already been taken. Yeah, fair point.
Devesh Sachdev
So, as I mentioned, In my earlier comment that Vive should also reiterated that we are preparing for s by 26 and going forward. So that the impact, whatever we need to take in this financial year, we have already and most of the pain is already being taken in q three.
Srijan Sinha
Okay, fair point. Fair point. One more question. On the disbursement side. I see that in the q four till date. You have already raised about 400 crores of liquidity the entire last quarter. You raised just about nearly about 500 crores. So, have you seen some bit of disbursement pickup in this quarter already in January? And February, initial part of February.
Gaurav Maheshwari
No. We are still being very calibrated. And. We are very watchful. And as I mentioned earlier, the system is taking time. The whole team is taking time to acclimatize with the new changes. Lot of great underwriting with lot of system development is also happening. So we will still be prudent and calibrated in this quarter. And once we have a confidence that the things, once we see the on the ground and there is an empirical evidence. As I mentioned earlier, five months mob is now giving us confidence, but we would still like to wait for one or two months. And. Also look at the certainty in terms of our liquidity. Before we really start talking about. Growth right now. Effort is to recover as much as possible, which has gone in different buckets. But I think we have a huge network. Team and everything. We are confident that once we see more evidence of stabilization, we can get back to a sustainable growth path.
Operator
Thank you very much. Region kindly come by. Ladies and gentlemen, we’ll take one. Last question from the line of. Please, go ahead.
Unidentified Participant
Hello. Am I audible?
Operator
Yes.
Unidentified Participant
Sir. I appreciate your efforts on astority front in various stages and the new customers underwriting so just want an update on what’s happening on state specific level. How are you seeing? The compulsory density. Are you facing any asset quality comeback? Massively. Any update, qualitative and particularly Tamil would be helpful.
Devesh Sachdev
So look, I think every. So if you can, just one is coming out of my heart, but. In between. I could not hear. What did you say? What do you want my view on?
Unidentified Participant
So, I mean, how is the collection happening over the period? Any articulative comment on as in how is the customer’s behavior? How are they coming back so on and so forth.
Devesh Sachdev
Yeah. So, look, we are, as I mentioned, and we have shown. We have shown ugly buckets. But I can tell you, each bucket we are seeing an improvement. Over the if I talk about from October to November, November to December, December to January, even January to February. Every bucket. We are seeing improvement. This customer you can understand. It’s a vulnerable section. This customer cannot give you three installment to whether or for installment together if you have to work. With this customer. And then a lot of follow up. Also.
One important thing which we have. Point is, we have seen. In various crises with this customer is that. They understand the kind of value. Which microfinance companies bring on the table. They understand that the doorstep surveys, they understand that it is one of the least. In terms of the cost. This is much better than going into informal sources and. All the other benefits. Which is available. So I think what we are seeing is that. Greenfoots. We have already shown that the current. The overall flow rate from current to zero, one to 30, 30 to 60. Is coming down slowly. We are seeing. That green shoots, people want to pay. Want to come back.
And once I think this whole guardrail and industry. Coming together will also help because it will send a very strong message that customer, nobody will be able to get money if they default, so. I think in the short term. There could be still some pain, but in the long term, I think this will be very good. For a sustainable growth sector because it will send a very strong message. That people need to pay. And every company will follow guardrails. So all that. In my view, and you have seen in our even the customer leverage is coming down. So all this clearly points out that whatever hitting which has happened, overheating, which has happened in the sector. It is slightly cooling off. And then I think in the next one or two quarters, you will see a stabilization and normalcy coming back.
Operator
Thank you very much, ladies and gentlemen. We’ll take that as a last question. On behalf of Fusion Finance Limited, we conclude this conference. Thank you for joining us. And you may now disconnect your lines. Thank you.
Devesh Sachdev
Thank you. Thank you, everyone.