Fusion Micro Finance Stock Lists at 2% Discount on Market Debut; Buy, Sell or Hold?

Fusion Micro Finance Share Price: Shares of Fusion Micro Finance made their stock market debut today, Tuesday, November 15, 2022. The stock opened at a 2.3 percent discount against its issue price of Rs 368. The stock started trading at Rs 360.50 on the BSE, while the listing price on the NSE was Rs 359.50.

Investors have, so far, bought 66.36 lakh equity shares against an offer size of 2.13 crore shares, data available on exchanges show.

Non-institutional investors, or high-networth individuals, have bid for 65 percent of the allotted quota of shares, while retail investors bought 33 percent of their portion.

The portion set aside for qualified institutional buyers (QIBs), who play an important role in an IPO, has been subscribed just 0.004 percent—bids have come in for 26,960 shares against a quota of 59.56 lakh shares.

The price band for the public issue has been fixed at Rs 350-368 per share. The face value of the equity share is Rs 10 each.

Investors can bid for a minimum of 40 shares and in multiples of 40 shares thereafter. With this, retail investors can make a minimum investment of Rs 14,720 per lot. At the maximum, they can buy shares worth Rs 1,91,360 for 13 lots.

The company will raise Rs 1,106 crore through its maiden public offer, comprising a fresh issue of shares worth Rs 600 crore, and an offer-for-sale (OFS) of 1.36 crore shares by the promoters and investors.

Promoters Devesh Sachdev, Mini Sachdev, Honey Rose Investment, and Creation Investments Fusion LLC will offload 35.5 lakh equity shares via the OFS. And investors Oikocredit Ecumenical Development Cooperative Society U A, and Global Impact Funds SCA SICAR will sell 66.06 lakh shares and 35.39 lakh shares via the OFS, respectively.

Fusion Micro Finance provides financial services to unserved and underserved women in rural and peri-rural areas across India. It has the fourth fastest gross loan portfolio, growing at a CAGR of around 54 percent between FY17-21, according to CRISIL.

However, analysts are not too bullish on the stock. “Majority of its revenue comes from certain states (Bihar, Uttar Pradesh, Odisha, Madhya Pradesh, Tamil Nadu, Punjab, Rajasthan) and business is exposed to interest rate risk, debt to equity ratio,” said Narendra Solanki, Head-Equity Research at Anand Rathi Shares & Stock Brokers.

Should Investors Buy, Sell or Hold?

Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd., said: “Fusion Microfinance: has debuted at Rs. 359 i.e. (-2.5%) over its issue price. The company’s muted listing can be attributed to unexciting investor subscription levels, high valuation, and the OFS nature of the issue. 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’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. Those who applied for listing gains can maintain a stop loss of Rs.340.”

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