New Delhi-based Fusion Micro Finance is all set to list on the stock exchanges on Tuesday. The company that launched an initial public offering (IPO) that was priced high 1,100 crore in the first week of November, 2.95 times oversubscription on exchanges. On BSE, Fusion will be listed for trading under ‘B’ group of securities. Fusion provides financial services to underserved and underserved women in rural and peri-rural areas across India.
As per the BSE notice, it said, “Trading members of the Exchange are informed that with effect from Tuesday, November 15, 2022 common share The securities of Fusion Micro Finance will be listed in the list of ‘B’ group securities and will be accepted for trading on the exchange.”
While NSE’s circular on Fusion Micro Finance stated, “The equity shares of the following company will be listed and admitted for trading on the Exchange with effect from November 15, 2022. Trading will take place in the general market segment – Compulsory Demat (Rolling Settlement ) for all investors.”
Fusion launched IPO to raise more than on 2 November 1,100 crores. The issue was available for subscription till 3 November. On the last day, the IPO was subscribed 2.95 times with qualified institutional buyers, showing huge appetite for Fusion shares.
The price band of the IPO was from 350 368 per equity share.
According to Crisil, Fusion is one of the youngest companies (in terms of holding an NBFC-MFI license) among the top NBFC-MFIs in India in terms of AUM as on June 30, 2022. It has the 4th fastest gross loan portfolio CAGR of 53.89% between FY 2017 and 2021 among the 10 largest NBFC-MFIs in India.
What do experts say?
Pravesh Gaur, Senior Technical Analyst, Swastika Investmart said, “Fusion Microfinance is a company that is one of the top 10 NBFC MFIs in India. It provides loans to women entrepreneurs. Its business runs on a joint liability group-loan model, in which a small number of women form a group and guarantee each other’s loans. The company operates with a strong focus on rural areas and has a well diversified and wide pan India presence.
Furthermore, Senior Analyst at Swastik said that the issue had received muted response from investors on both the institutional as well as retail side, and the current GMP is 5 ie ~1.3% higher than its issue price.
Nevertheless, Swastik’s expert said that the margins of the company are now in declining mode, and it is facing risk due to the category of borrowers, the rise in NPA levels may also be a matter of concern for the company. Secondly, the company seeks a price-book (P/B) multiple of 1.8 on a post-IPO basis, while its counterpart CreditAccess commands a P/B of 3.3. As a result, he said, “we were assigned only to high-risk, long-term investors.”
Meanwhile, Ravi Singhal, CEO of GCL Securities, expects a flat listing of Fusion Microfinance shares as the sector continues to be an underperformer in the recent past and the public issue has also not received a strong response.
However, Singhal also said that “a lot will depend on the market sentiment. The stock is expected to trade at a premium of up to 5% in case of positive market sentiments, however the stock may open at a discount of 5% in case of negative bias on Dalal Street.” Hence, one can expect Fusion Microfinance share price to start around 330 per level in case of negative market opening whereas it may be around from 385 390 level per share in case of a strong opening of the market.
Furthermore, Abhay Doshi, founder of UnlistedArena.com, pointed out that Fusion Micro Finance received a lackluster response amid the flood of IPOs. The issue seemed costly, and the microfinance sector has largely underperformed since the Covid pandemic. Furthermore, multiple IPOs at the same time have divided investor interest to a great extent.
Due to all these factors, Doshi said the listing may not be very profitable, and we may see the issue getting listed in the flat to marginal discount zone.
Earlier, in its IPO note, Nirmal Bang had highlighted that despite Covid, Fusion has managed to improve its asset quality by limiting GNPAs/NNPAs below 6%/3% during FY21 and FY22. managed properly. More than 4%/20% on a continuous basis barring any force majeure event that disrupts the microfinance industry every few years. Fusion’s metrics are similar to those of the largest listed MFi players such as CreditAccess, while at a massive 45% discount to Fusion’s valuation.
Disclaimer: The views and recommendations given above are of individual analysts or broking companies and not of Mint.
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