Fusion Micro Finance makes muted debut; lists at 2% discount

Shares of Fusion Micro Finance made a tepid debut on Dalal Street on Tuesday as the non-banking finance company (NBFC) listed at ₹359.50 on the National Stock Exchange (NSE), a discount of 2.3% over its final issue price of ₹368. On the Bombay Stock Exchange (BSE), the stock opened higher at ₹360.50, down 2% from the offer price. In comparison, the BSE Sensex was trading 110 points lower at 61,514 levels, tracking mixed cues from global peers.

Post listing, Fusion Micro Finance shares touched a high and low of ₹364.35 and ₹348.85, respectively, on the BSE, while the market capitalisation stood at ₹3,529.6 crore. On the NSE, it hit a high and low of ₹360 and ₹351.90, respectively.

The muted listing of Fusion Micro Finance was in line with market expectations as the stock was trading at a discount of ₹5 in the grey market, an informal market where stocks are bought and sold even before they are available on stock exchanges. The IPO of Fusion Micro Finance had received mixed reviews from brokerage houses as some analysts recommended “subscribe” while some gave “neutral” ratings to the issue. Analysts at Religare Broking, Capital Market, AngelOne had given a neutral rating to the IPO, while Swastika, Reliance Securities, Nirmal Bang had recommended subscribe ratings.

The micro lender’s ₹1,104 crore initial public offering (IPO), which opened for subscription in the first week of November, received lukewarm response from investors, especially retail buyers, with the issue oversubscribing by just 2.95 times. The IPO, which had a price band of ₹350-₹368 apiece, received strong response from qualified institutional buyers. As per the data available on the NSE, the quota for qualified institutional buyers was booked 8.6 times, whereas the non-Institutional buyers section was subscribed 1.38 times. The portion reserved for retail investors merely received 51% bid.

The public offer was a mix of fresh equity shares and an offer for sale (OFS) by existing shareholders. The IPO comprised of fresh issue of equity shares worth up to ₹600 crore and OFS of up to 6.5 lakh equity shares by Devesh Sachdev (founder and chairman of the MFI); up to 1 lakh equity shares by Mini Sachdev (wife of Devesh Sachdev), and up to 14 lakh equity shares each by Honey Rose Investment and Creation Investments Fusion, LLC, owned by Warburg Pincus. Besides, the Dutch impact investor Oikocredit Ecumenical Development Co-operative Society, and Global Financial Inclusion Fund also trimmed their stake in the company via OFS.

The company intends to use net proceeds from the fresh issue of equity shares to boost its capital base.

Ahead of the IPO, the New-Delhi based company raised around ₹331 crore from 17 anchor investors by allotting 89,99,943 equity shares at ₹368 apiece, the upper end of price band.

In a separate development, Fusion Micro Finance has announced that CRISIL has upgraded its long-term rating on the bank facilities and debt instruments of the company to ‘CRISIL A/Stable’ from ‘CRISIL A-/Stable’. “The upward revision in the rating is driven by substantial increase in capital position of the company and expected improvement in profitability Fusion Micro Finance has completed raising fresh equity of ₹600 crore recently which is around 43% of existing net worth,” as per the CRISIL Rating report.

Post this capital raise, Fusion’s overall net worth will rise over ₹2,000 crore from ₹1,416 crore as of June 30, 2022, the report noted.

Formed in 2010, Fusion Micro Finance, which provides financial services to unserved and underserved women in rural and peri-rural areas across India, intends to use funds proceeds of the fresh issue to augment the capital base of the company. As of June 30, 2022, total AUM was at ₹7,389 crore, with strong growth at 53.8% CAGR in FY17-21. On the asset quality front, the gross non-performing asset (GNPA) ratio was at 3.6% at the end of June quarter of 2022, while net NPA stood at 1.3%. According to Crisil, the company had the sixth lowest gross NPA ratio among the top 10 NBFC-MFIs in India during FY22.