Fusion Micro Finance IPO opens for public subscription, GMP rises; should you subscribe?

Fusion Micro Finance IPO opened for subscription on Wednesday (2 November), and will conclude on 4 November. The non-banking finance company (NBFC) has fixed the IPO price band at Rs 350-368 apiece. The Rs 1,104 crore IPO comprises issuance of fresh equity shares worth Rs 600 crore and an offer for sale (OFS) worth Rs 504 crore of 13,695,466 equity shares by promoters and existing shareholders. Half of the issue size has been reserved for qualified institutional investors (QIBs), 35% for retail investors and the remaining 15% for non-institutional investors (NIIs). The minimum bid is that of 40 equity shares and then in multiples thereof. The face value of each share would be Rs 10. Fusion Micro Finance IPO shares were commanding a grey market premium (GMP) of Rs 35-40 apiece.

Fusion Micro Finance IPO share allotment date is 10 November, and the shares will be credited into the Demat accounts of successful bidders on 14. November. Fusion Micro Finance shares will debut on both the leading exchanges BSE and NSE on 15 November. Ahead of IPO, the company raised a little over Rs 331 crore from anchor investors. It allotted 89,99,943 equity shares to anchor investors at Rs 368 apiece, aggregating the transaction size to Rs 331.2 crore, according to a circular uploaded on the BSE’s website. Fusion Micro Finance is a strong player in a sustainably and well growing MFI sector with healthy growth and operational performance, said ICICIdirect in its IPO note.

Should you subscribe to Fusion Micro Finance IPO?

Reliance Securities: Subscribe“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.

Nirmal Bang: Subscribe“Fusion has grown its AUM at a CAGR of 37% over FY20-22, one of the fastest amongst listed financials. 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. We recommend to ‘Subscribe’ to the issue.”

Hem Securities: Subscribe“Fusion Micro Finance is well diversified and has extensive Pan-India presence with strong rural focus. Company has access to diversified sources of capital and effective asset liability management with robust underwriting process and risk management policies. Its stable and experienced management team supported by marquee investors indicates decent fundamentals with strong growth potential in future. Also issue seems reasonably priced at current level but looking after industry ,we recommend “Subscribe” on issue for risk appetite investors.”

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Swastika Investmart: Subscribe“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 longterm view.”

(The stock recommendations in this story are by the respective research analysts and brokerage firms. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)