Fusion Micro Finance IPO will open for subscription on Wednesday. The issue comprises a fresh issuance of equity shares worth Rs 600 crore and an offer of sale of 1,36,95,466 equity shares by promoters and existing shareholders. The price band for the same is fixed at 350-368 per share.
Ahead of its IPO, the company had on Tuesday allotted 89,99,943 equity shares to 17 anchor investors at Rs 368 apiece, aggregating to Rs 331.20 crore. The issue will conclude on November 4.
Analysts said the issue is for investors with good risk appetite, who can stay invested for a long-period of time. Last heard, the issue was commanding a grey market premium (GMP) of Rs 35 a piece.
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.
At the upper limit of the price band, the IPO valuations work out to 1.9 times adjusted FY22 book value per share (BVPS) and 168 times FY22 diluted EPS.
"Fusion Micro Finance reported a strong revenue growth (CAGR of 31 per cent) and healthy advances growth (CAGR of 33 per cent) over the last two years. Though it posted strong growth in top lines, it recorded declining profits due to the pandemic, and expansion spending from FY20 to FY22. Going forward, strong tailwinds in banking sector, uptick in credit cycle and strong Q1FY23 results of FML, considering all the positive factors, we believe this valuation is at reasonable levels," Angel One said.
ICICIdirect said competition from other MFIs, banks and financial institutions and substantial collections and disbursements in cash are among key risks. This brokerage has not rated the IPO.
Among the selling shareholders are Devesh Sachdev (up to 6.50 lakh shares), Mini Sachdev (up to 1 lakh shares), Honey Rose Investment (up to 14 lakh shares) and Creation Investments Fusion (up to 14 lakh shares). Other selling shareholders will include Oikocredit Ecumenical Development Cooperative Society UA (up to 66,06,375 shares) and Global Impact Funds SCA SiCAR (up to 35,39,091 shares).
Honey Rose Investment, which owns 48.65 per cent stake in the company, is directly owned by certain private equity funds managed by Warburg Pincus. Creation Investments Fusion is an alternative investment management company.
Half of the issue size will be reserved for qualified institutional buyers, 35 per cent for retail investors and the rest 15 per cent for non institutional investors.
Investors could bid for a minimum of 40 shares and in multiples thereof.
Net proceeds from the fresh issue will be used to augment the capital base of the microfinance firm.
Also Read: Fusion Microfinance IPO price band set at Rs 350-368; issue to open on Nov 2
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