Fusion Micro Finance IPO opens today: All you need to know

The Rs 1,103.99 crore Fusion Micro Finance IPO will be available for subscription till Friday, November 4, 2022, and the price band of the company has been fixed at Rs 350-368 per share.

Fusion Micro Finance IPO comprises fresh issuance of equity shares worth Rs 600 crore and an offer of sale of 13,695,466 equity shares by promoters and existing shareholders.

Those selling shares in the OFS are – Devesh Sachdev, Mini Sachdev, Honey Rose Investment Ltd, Creation Investments Fusion LLC, Oikocredit Ecumenical Development Co-operative Society UA and Global Financial Inclusion Fund SCA SICAR.

The net proceeds from the fresh issue will be used to augment the capital base of the company, according to the information given in the red herring prospectus (RHP).

Half of the issue size has been reserved for qualified institutional buyers (QIBs), 15 per cent for non-institutional investors and the remaining 35 per cent for retail investors.

Fusion Micro Finance claims to provide financial services to underserved women across India in order to facilitate their access to greater economic opportunities.

Investors who wish to subscribe to Fusion Micro Finance IPO can bid in a lot of 40 equity shares and multiples thereafter. At the upper price band, they will be shelling out Rs 14,720 to get a single lot of Fusion Micro Finance. The shares will be listed on both BSE and NSE.

The applicants also must note that the cut-off time for UPI mandate acceptance is Friday, November 4, 2022, upto 5:00 pm, the last day of IPO bidding. Further bids with confirmed status of mandate amount blocked (RC100) shall be considered as valid applications and hence, investors are advised to submit their UPI applications in IPO well in advance to avoid any last minute technical/systemic constraints that may hamper their ability to participate in IPOs by successfully accepting the mandate.

IIFL Securities, ICICI Securities, CLSA India and JM Financial are the book-running lead managers to the offer while Link Intime India is the registrar of the issue.

Ahead of the IPO, Fusion Micro Finance on Tuesday raised over Rs 331 crore (Rs 3,31,19,79,024) from 17 anchor investors in lieu of 89,99,943 equity shares at Rs 368 each, data from the stock exchanges showed.

The anchor investors include Nomura, BNP Paribas Arbitrage, Aditya Birla Sun Life Mutual Fund, ICICI Prudential MF, Edelweiss MF, Motilal Oswal MF, HDFC Life Insurance Company, Bajaj Allianz Life Insurance Company and Kotak Mahindra Life Insurance Company among others.

The research teams at Reliance Securities and Swastika Investmart in their respective IPO notes have given a “Subscribe” rating to the offer.

Reliance Securities in its IPO note said, “Based on FY22 annualized earnings, the company is valued at 2.8x P/BV. Fusion has optimized cost of funds, liquidity requirements and capital management over the years, in challenging market conditions, led by prudent liability management, ability to secure sufficient and diversified borrowings on competitive terms and improving credit ratings. In view of well diversified and extensive pan-India presence, proven execution capabilities with strong rural focus, a knack for quick adoption of technology access to capital, effective asset liability management and valuation comfort we recommend a ‘SUBSCRIBE’ to the issue.”

Swastika Investmart in its reserch report noted, “The microfinance industry has recorded healthy growth in the past few years, with microfinance lenders emerging in good numbers. Fusion Micro Finance is one such company which 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. The company also has access to diversified and recognised sources of capital and has a good financial track record. Although this company’s margins are now in declining mode and it is facing risk due to the category of borrowers it serves, an increase in the level of NPA’s 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, where its peers like creditAccess command a P/B of 3.3. Thus, considering all the factors, we recommend a Subscribe rating for this issue, but only for high-risk investors with a long-term view.“