PremiumNew Delhi-based Fusion Micro Finance is set to get listed on stock exchanges on Tuesday. The company which launched an initial public offering (IPO) worth over ₹1,100 crore in the first week of November, received an oversubscription of 2.95 times on exchanges. On BSE, Fusion will be listed for trading under the 'B' group of securities. Fusion provides financial services to unserved and underserved women in rural and peri-rural areas across India.
As per BSE notice, it said, "trading members of the exchange are hereby informed that effective from Tuesday, November 15, 2022, the equity shares of Fusion Micro Finance shall be listed and admitted to dealings on the Exchange in the list of 'B' group of securities."
While the NSE circular on Fusion Micro Finance said, "the equity shares of the following company shall be listed and admitted to dealings on the Exchange w.e.f. November 15, 2022. Trading shall be in the Normal Market segment – Compulsory Demat (Rolling Settlement) for all investors."
Fusion launched its IPO on November 2 to raise more than ₹1,100 crore. The issue was available for subscription till November 3. On the last day, the IPO received 2.95 times subscriptions with qualified institutional buyers showing a massive appetite for Fusion shares.
The IPO had a price band of ₹350 to ₹368 per equity share.
Fusion is one of the youngest companies (in terms of getting an NBFC-MFI licence) among the top NBFC-MFIs in India in terms of AUM as of June 30, 2022, according to CRISIL. It has the fourth fastest gross loan portfolio CAGR of 53.89% between the financial years 2017 and 2021 among the 10 largest NBFC-MFIs in India.
What do experts say?
Pravesh Gour, Senior Technical Analyst, Swastika Investmart said, Fusion Microfinance is one such company that is among the top 10 NBFC MFIs in India. It offers loans to women entrepreneurs. Its business runs on a joint liability group-lending model, wherein a small number of women form a group and guarantee one another’s loans. The company works with a strong focus on rural areas and has a well-diversified and extensive pan-India presence.
Further, Swastika's senior analyst added that the issue had received a muted response from investors on both the institutional as well as Retail side, and the current GMP is 5 i.e. ~ 1.3% over its issue price.
Nevertheless, Swastika's expert added that the company's margins are now in decline mode, and it is facing risk due to the category of borrowers it serves, an increase in the level of NPAs could also be a concern for the company. Secondly, the company demands a price-book (P/B) multiple of 1.8 on a post-IPO basis, whereas its peers like CreditAccess command a P/B of 3.3. As a result, he said, "we were only assigned to high-risk, long-term investors."
Meanwhile, Ravi Singhal, CEO at GCL Securities expects a flat listing of Fusion Microfinance shares as the sector has remained underperformer in recent times and the public issue too failed to get a strong response.
However, Singhal also added that "much will depend upon the market mood. The stock is expected to give premium up to 5% in case of positive market sentiments however in case of negative bias on Dalal Street, the stock may open at 5% discount. So, one can expect Fusion Microfinance share price debut at around ₹330 apiece levels in case of negative market opening whereas it may be around ₹385 to ₹390 apiece levels in case of strong market opening."
Further, Abhay Doshi, Founder at UnlistedArena.com pointed out that Fusion Micro Finance received a lacklustre response amidst a flood of IPOs. The issue looked pricey, and the microfinance sector has largely underperformed since covid pandemic. Furthermore, multiple IPOs at the same time have largely divided investor interests.
Because of all of these factors, Doshi said that the listing may not be very rewarding, and we may see the issue getting listed in flat to minor discount zone.
Earlier, in its IPO note, Nirmal Bang had highlighted that despite covid, Fusion has managed its asset quality well by restricting GNPA/NNPA below the 6%/3% mark over FY21 & 22. Fusion is well placed to deliver ROA/ROE in excess of 4%/20% on a sustained basis barring any unforeseen event which hampers the micro finance industry every few years. Fusion’s metrics are similar to those of the largest listed MFI player viz CreditAccess, while Fusion’s valuations are at a steep discount of 45% in comparison.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.