Fusion Micro Finance IPO Details and Review – Should you Avoid?

New Delhi based Fusion Micro Finance is coming up with an IPO now. This IPO would open for subscription on 2nd November, 2022. Fusion Micro Finance Ltd is engaged in providing financial services to women entrepreneurs belonging to the economically and socially deprived section of the society. Should you invest in Fusion Micro Finance IPO? This article would provide IPO details, Dates, GMP, Listing Date and conclusion on whether this is good or bad for investment.

Also Read: This Largecap Mutual Fund has highest SIP Returns in last 5 years

About Fusion Micro Finance Limited

Company is engaged in providing financial services to women entrepreneurs belonging to the economically and socially deprived section of the society. Its responsibilities are not restricted merely to financial support, but also to acquaint the clients to manage their finances by disseminating Financial Literacy to them.

Fusion Micro Finance IPO - Details, Review and Analysis

Fusion Micro Finance IPO Details

IPO Opening Date 02-Nov-22
IPO Closing Date 04-Nov-22
Issue Type Book Built Issue IPO
Face Value Rs 10 per equity share
IPO Price band Rs 350 to Rs 368 per equity share
Lot Size 40 Shares
Min Order Quantity 40 Shares
Listing at BSE and NSE
Total Issue Size Rs. 1103.99 Crores
    Fresh issue     Rs. 600 Crores
    OFS     Rs. 503.99 Crores

Fusion Micro Finance IPO RHP

What are the strengths of Fusion Micro Finance Limited?

1) Company is well Diversified and Extensive Pan-India Presence.

2) It has proven execution capabilities with a strong rural focus.

3) Company has access to diversified sources of capital and effective asset liability management.

What are the Objects of the IPO Offer?

Fusion Micro Finance IPO Size is Rs 1,104 Crores which has OFS and fresh issue.

1) Offer for Sale for Rs 504 Crores: Under OFS, selling shareholders would sell their shares and the company would not get any money from this IPO proceeds.

2) Fresh issue of Rs 600 Crores:  Fresh proceeds would be used to augment the capital base of the company.

Who are the promoters of Fusion Micro Finance Limited?

Devesh Sachdev, Creation Investments Fusion, LLC, Creation Investments Fusion II, LLC and Honey Rose Investment Ltd are the promoters of the company.

How is the company financial track record?

Here are the total assets, revenues and profits of the company in the last 3 years and 3 months.

Financial Year ending / Period ending (Amt in Crores)
Particulars FY20 FY21 FY22 30-Jun-22
Total Assets 4,240.0 5,837.9 7,290.5 7,615.2
Revenues 730.3 873.1 1,201.4 360.5
Profit After Tax 69.6 43.9 21.8 75.1
Profit % 9.53% 5.03% 1.81% 20.84%

Why to invest in Fusion Micro Finance IPO?

Here are the positive factors in this company.

1) Fusion Micro Finance Ltd is the leading company in India which is engaged in providing financial services to women entrepreneurs belonging to the economically and socially deprived section of the society.

2) Company is well diversified with presence across Pan India with strong rural focus.

3) Company has strong revenue growth in the last 3 years.

Risk Factors of investing in Fusion Micro Finance IPO

1) Company margins are in down trend in the last 3 years. Its profits were at Rs 69.6 Crores in FY20 Vs Rs 21.8 Croes in FY22. Even though there is an increase in revenues, drop in margins is a key concern.

2) Out of the total IPO proceeds, Rs 504 Crores goes to OFS and company would not get anything from this.

3) Covid pandemic has impacted the business in the past. Such pandemics are uncertain and can impact in future too.

4) Increase in NPAs can impact the business

5) The microfinance industry in India faces unique risks due to the category of borrowers that it services, which are generally not associated with other forms of lending.

6) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.

Frequently Asked Questions (FAQs)

What is Fusion Micro Finance IPO date?

This IPO would open on 2nd November, 2022 and closes on 4th November, 2022.

What is Fusion Micro Finance Share Price?

The IPO share price band is Rs 350 to Rs 368 per share.

What is Fusion Micro Finance IPO Rating?

Company do not require to get an IPO rating as this issue is for equity shares. Currently, Fusion Micro Finance short term rating and long term rating is not available.

How much portion allocated to each group of investors in this IPO?

1) QIB - Not less than 50% of the offered shares 2) NII / HNI - Not less than 15% of the offered shares 3) Retail - Not less than 35% of the offered shares

Is it good or bad for investment?

Investor should always invest in a company that has strong financial track record. This company has generated strong revenue growth in the last 3 years and 3 months. However, its margins are on declining mode.

What is Fusion Micro Finance IPO GMP today?

GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about the IPO price as it is unorganized market. Fusion Micro Finance GMP today as per market observers is between Rs 25 to Rs 40. Fusion Micro Finance IPO GMP Chanakya – Nil Fusion Micro Finance GMP as per IPOCentral – Rs 40 Fusion Micro Finance IPO GMP IPOWatch – Nil Fusion Micro Finance IPO GMP IPO Bazar – Nil

IPO of Fusion Micro Finance Valuation

Fusion Micro Finance IPO price band is Rs 350 to 368 per share.

If we consider FY2022 EPS, the P/E ratio works out to be 140x.

If we consider last 3 years weighted EPS, the P/E ratio works out to be 75x.

Margins for Q1 FY23 are abnormal and if we annualize them, the P/E works out to be 10x. Ideally, one should not consider such abnormal profits into consideration during valuations.

Means company is asking for the issue price in P/E of 75x to 140x. There are listed peers like Ujjivan Small Finance Bank trading at P/E 342x (Highest) and Credit Access Grameen Bank trading at P/E 20x (Lowest) and industry average P/E is 114x. Hence Fusion Micro Finance IPO share price is overpriced.

Fusion Micro Finance dates – subscription, Allotment and Listing

Offer Open 02-Nov-22
Offer close 04-Nov-22
Finalization of Allotment 10-Nov-22
Initiation of Refunds 11-Nov-22
Credit to Demat Account 14-Nov-22
IPO Shares Listing Date 15-Nov-22

How to buy Fusion Micro Finance IPO online through Zerodha?

If you do not have Zerodha account, sign-up here and proceed to the next step.

If you have a demat account with Zerodha, you can apply this IPO online using the UPI as a payment gateway. Zerodha customers can apply in this IPO by login into Zerodha Console submitting an IPO application form.

Follow below steps to apply this IPO in Zerodha platform:

1) Visit the Zerodha portal and login to the console.

2) Go to Portfolio and click the IPOs link.

3) Visit ‘Fusion Micro Finance Limited IPO’ row and click the ‘Bid’ button.

4) Enter your UPI ID, Qty and the Price which you want to bid.

5) Click on ‘Submit’ IPO application form.

6) Visit the UPI App (net banking or BHIM) to approve the mandate.

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Fusion Micro Finance IPO Review – Should you invest or avoid?

After going through all these points, you might be wondering whether Fusion Micro Finance IPO is good or bad for investment?

Company is engaged in providing financial services to women entrepreneurs belonging to the economically and socially deprived section of the society with a strong rural focus and pan India presence. It has shown strong revenue growth in the last 3 years.

On the other side, its margins are on declining mode. Its Q1 FY23 margins are very high which I feel should not be considered while doing the valuation of the company unless these are sustained in the coming quarters.

Its risky IPO considering that it is aggressively priced. If we take any bank, P/E is priced between 20x to 50x of their earnings, however, this company is asking for P/E ratio of 75x to 140x.

Should I invest in such high priced company that too when the margins are on declining mode? Can I wait for some more time to make a decision when it might be available at discounted price post listing? Yes, I would wait. I am not in a hurry.

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Suresh KP

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