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Warburg Pincus, others lead funding round in Fusion MFI

Founded by Devesh Sachdev in 2010, Fusion served nearly 2 million clients in over 575 branches spread across 18 states in the country, as of year ended 31 DecemberPremium
Founded by Devesh Sachdev in 2010, Fusion served nearly 2 million clients in over 575 branches spread across 18 states in the country, as of year ended 31 December

  • Firm will use the funds to grow its distribution network and integrate tech solutions across key business lines
  • In December 2018, Warburg had led a 520-crore funding in Fusion, which also marked Warburg’s first investment in a microfinance firm in India

MUMBAI : Fusion Microfinance Pvt. Ltd, a microfinance institution (MFI) based in New Delhi, on Tuesday said it has secured 500 crore from existing investors Warburg Pincus and Chicago-based impact investor Creation Investments Capital Management Llc.

The latest capital will be used to boost its distribution network in India, integrate technology solutions across key business lines, and strengthen the platform for more growth opportunities within the microfinance sector.

“The follow-on investment by existing investors will help expand the capital base to support Fusion’s growth plans," said Narendra Ostawal, managing director, Warburg Pincus.

In December 2018, Warburg had led a 520-crore funding in Fusion, which also marked Warburg’s first investment in a microfinance firm in India. Warburg’s other investments in financial services include AU Small Finance Bank, education-focused lender Avanse Financial Services, IDFC First Bank, and life insurer IndiaFirst Life Insurance.

Fusion, founded by Devesh Sachdev in 2010, served nearly two million clients through its team of more than 5,500 people across over 575 branches in 18 states in India as of 31 December 2019. The micro-lender’s assets under management stood at 3,350 crore and about 92% of it were focused on rural customers. Over three-fourths of its portfolio was concentrated in five states, Bihar, Uttar Pradesh, Odisha, Madhya Pradesh, and Haryana.

“Fusion has been among the faster growing companies in the sector over the last few years and is committed to maintaining a steady and sustainable pace at a much larger scale over the next 3-5 years. Building on a strong operating platform and strategic initiatives, we are well placed to become a valued company in the financial inclusion space," said Sachdev.

As of fiscal year ended 31 March 2019, the micro-lender’s net interest income stood at 213.15 crore, while its profit stood at 65.35 crore. In terms of asset quality, the company’s gross non-performing assets were 1.41% of its total advances, while its capital adequacy ratio was at 27.33%, according to a 30 August report by ratings agency Icra Ltd.

The microlender has diversified its portfolio geographically, thus reducing the exposure to the top three states in its portfolio, which earlier contributed almost three-fourths of its loan book, Icra noted.

“Fusion Microfinance has diversified its portfolio geographically with the share of the top three states reducing to 51% as on 30 June 2019, from 73% as on 31 March 2016. Even at the district level, the share of the top 5 and top 10 districts decreased to 9% and 15%, respectively, as on 30 June 2019 from 24% and 38%, respectively, as on 31 March 2016," the credit rating agency said.

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