Fusion Microfinance IPO: As the issue opens today, should you apply or leave? GMP, Other Details

 

• Fusion Microfinance IPO involves issue of equity shares of ₹600 crore and OFS of 13,695,466 shares

Microlender Fusion Microfinance's Initial Public Offering (IPO) will take place on Wednesday, November 2, 2022, and the issue, with a price band of ₹350-368 per share, will end on Friday, November 4, 2022. The company on Tuesday said it has raised a little over ₹331 crore from anchor investors ahead of its initial share sale.

According to market observers, the shares of Fusion Microfinance are commanding a premium (GMP) of ₹35 in the gray market today. The company's shares are expected to be listed on the stock exchanges BSE and NSE on Tuesday, November 15, 2022.

Fusion Microfinance IPO consists of issue of equity shares worth ₹600 crore and Offer for Sale (OFS) of 13,695,466 equity shares by promoters and existing shareholders. The net proceeds of the new issue will be used to increase the capital base of the microfinance firm.

“Though margins of this company are now in declining mode and it is facing risk due to the category of borrowers, increase in NPA level may also be a matter of concern for the company. Secondly, the company seeks a price-book (P/B) multiplier of 1.8 on a post-IPO basis, where its counterparts such as Credit Access commands a P/B of 3.3. Thus, considering all factors, we recommend a membership rating for this issue, but only for high-risk investors with a long-term outlook," said Swastika Investmart.

The New Delhi based microfinance company claims to provide financial services to underprivileged women across India to facilitate their access to greater economic opportunities. The company uses a Joint Liability Group (JLG) model developed by Gramin Bank in Bangladesh for lending up to ₹50,000.

“The profitability of the company was declining in the previous years due to the COVID impact. From FY2023, they are expecting a recovery in profits. On the valuation front, it is available at a P/BVPS of 2.28x in FY2022 as against the industry average of 2.5x which appears quite priced. Thus, we recommend subscribing for listing benefits," Canara Bank Securities said.

ICICI Securities, CLSA India, JM Financial and IIFL Securities are the merchant bankers to the issue. LINK INTIME INDIA PRIVATE LIMITED is the registrar for the initial share sale.