Fusion Microfinance IPO: GMP, subscription status on day of the issue

As per market observers, Fusion Microfinance shares are commanding a premium (GMP) of ₹24 in the grey market today. The company’s shares are expected to list on stock exchanges BSE and NSE on Tuesday, November 15, 2022.

Fusion Microfinance IPO comprises fresh issuance of equity shares worth ₹600 crore and an offer of sale (OFS) of 13,695,466 equity shares by promoters and existing shareholders. The company is expected to raise ₹1,104 crore at the upper end of the price band. Net proceeds of the fresh issue will be used to augment the capital base of the microfinance firm.

Fusion Micro Finance provides financial services to unserved and underserved women in rural and peri-rural areas across India. It is one of the youngest companies in terms of getting an NBFC-MFI license and among the top NBFC-MFIs in India in terms of AUM as of June 30, 2022. They currently have 2.9 mn active borrowers and a network of 966 branches and 9,262 permanent employees spread across 377 districts in 19 states and UT in India.

Those selling shares in the OFS are Devesh Sachdev (founder and chairman of the MFI), his wife Mini Sachdev, Honey Rose Investment and two funds of Creation Investments Fusion, the Dutch impact investor Oikocredit Ecumenical Development Co-operative Society, and Global Financial Inclusion Fund. 

“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,” said Swastika Investmart.