The initial public offering (IPO) of Fusion Micro Finance has been subscribed 20 per cent so far on the second day of subscription on Thursday. The initial share sale received bids for 42,34,840 shares against 2,13,75,525 shares on offer, according to BSE data.
The non-institutional investors’ category received 38 per cent subscription by 2:09 pm and the retail individual investors’ portion was subscribed 24 per cent. The qualified institutional buyers (QIBs) quota was yet to get any traction.
Half of the issue size would be reserved for QIBs, 35 per cent for retail investors and the rest 15 per cent for non-institutional investors.
With a price range of Rs 350-368 a share, the IPO has a fresh issue of up to Rs 600 crore and an offer for sale (OFS) of up to 1,36,95,466 equity shares.
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Fusion Micro Finance has raised Rs 331 crore from anchor investors ahead of its IPO. The three-day issue would conclude on November 4.
Investors could bid for a minimum of 40 shares and in multiples thereof.
Latest grey market premium
Market participants said Fusion Micro Finance IPO’s grey market premium (GMP) today is at Rs 22. It implies that the grey market is expecting the lender to list around Rs 390 (Rs 368 + Rs 22), which is nearly 6 per cent higher than the IPO’s upper band price of Rs 368 per equity share.
Expert views
“As of FY22 (2021-22), Fusion Micro Finance had a gross AUM (assets under management) of Rs 6,785 crore. On the operational front, the top line is growing somewhat while the bottom line remains inconsistent, Manan Doshi, UnlistedArena.com, told Business Today.
“The issue looks richly priced at over 2.27 times its book value. Also, the clash of multiple IPOs may divide investors’ participation,” he added.
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“The microfinance industry has recorded healthy growth over the past few years, with lenders emerging in good numbers. Fusion Micro Finance is one such company which is among the top 10 NBFC (non-banking financial company) MFIs in India,” said Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd.
“With a strong focus on rural areas, the company has a well-diversified and extensive pan-India presence. It also has access to diversified and recognised capital sources and 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 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 (Grameen), 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 long-term view,” he added.
Brokerage views
Angel One has a ‘Neutral’ rating on the issue. It believes investors may consider investing in Fusion Micro Finance from a medium to long-term perspective.
ICICIdirect said competition from other MFIs, banks and financial institutions and substantial collections and disbursements in cash are among key risks. The brokerage didn’t rate the IPO.
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Meanwhile, the company said that net proceeds of the fresh issue would be used to augment the capital base of the microfinance firm.
IIFL Securities, ICICI Securities, CLSA India and JM Financial are the managers of the offer.