NBFC stock hits 52 week high after company’s net profits increases by 1,660%

Shares of Fusion Micro Finance Limited closed today at a price of Rs 493, gaining around 3 percent as compared to the previous closing price of Rs 479.60. The scrip touched its 52-week high mark at a price of Rs 519.80. In the last one-month period, the stock has moved up nearly 22 percent ranging from Rs 404.80 to the current price levels. 

Through a regulatory filing with the BSE as of the 22nd of May 2023, the company announced its financial results for Q4 as well as for FY2022-23. Some of the major financial metrics are been discussed later on in the piece. 

Fusion Micro Finance Limited is engaged in micro finance lending activities which comprise the provision of financial services to poor women in India who are organized as ‘Joint Liability Groups’ (JLGs). Moreover, the company also provides small-value collateral-free loans. 

It uses an in-house distribution channel to provide financial products and services to the members relating to the provision of loans to members pertaining to the purchase of certain productivity-enhancing products including bicycles, mobile handsets, etc. 

Having a quick walkthrough of the quarterly financials posted by the company, the operating revenues, as well as net profits, have increased with the former increasing from Rs 459 crores in Q3 to Rs 501 crores in Q4 and the latter taking a shift from Rs 102 crores to Rs 115 crores during the same time horizon. 

A YoY comparison of the same two parameters mentioned above leads us to understand that the company has been successful in maintaining a decent growth rate with operating revenues moving up from Rs 1,151 crores during FY21-22 to Rs 1,742 crores in FY22-23 and net profits showing a huge up movement of nearly 1,660 percent, moving from Rs 22 crores to Rs 387 crores. 

Coming onto the profitability metrics, the return on equity (ROE), as well as return on capital employed (ROCE), has consistently been reducing over the past 3 financial years with the most recent movement in ROE being a reduction from 3.61 percent during FY20-21 to 1.69 percent in FY21-22 and ROCE reducing from 8.77 percent to 8.2 percent. 

The net profit margins also took a hit and reduced from 5.13 percent during FY20-21 to 1.89 percent in FY21-22. 

Written by Amit Madnani

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