Fusion Micro Finance made a weak market debut on Tuesday, as the scrip got listed at Rs 359.50 on NSE, a 2.31 per cent discount to its issue price of Rs 368.
On BSE, the scrip debuted at Rs 360.50, down 2.04 per cent.
The IPO, which was commanding a grey market premium of Rs 35 a few days ago, quoted at a discount of Rs 2 in the grey market on Monday. This is even as rating agency CRISIL upgraded Fusion Micro Finance's long-term rating on the bank facilities and debt instruments to ‘CRISIL A/Stable’ from ‘CRISIL A-/Stable’.
The issue, which was sold from November 2 to November 4 in the Rs 350-368 price band, got a total of 2.95 times subscription. The issue was commanding a grey market premium of Rs 35 when the IPO was announced. However, the premium fell amid muted investor response to the issue.
Analysts had advised investors with good risk appetite, who can stay invested for a long-period of time, to 'subscribe' to the issue. They said financial ratios for Fusion Micro Finance were solid and the overall fundamentals were good, but there were industry-related concerns.
Competition from other MFIs, banks and financial institutions and substantial collections and disbursements in cash were also seen as risks.
CRISIL, meanwhile, said its upward revision in the rating was driven by substantial increase in capital position of the company and expected improvement in profitability.
"Fusion Micro Finance has completed raising fresh equity of Rs 600 crore recently which is 43 per cent of existing networth, as per the CRISIL Rating report. Post this capital raise, Fusion’s overall networth will rise over Rs. 2,000 crore from Rs. 1,416 crore as of June 30, 2022," it said.
Fusion Micro Finance provide financial services to underserved women across India. The company’s focus customer segment is women in rural areas with an annual household income of up to Rs 3,00,000. As of June 30, 2022, the company had 2.90 million active borrowers, which were served by its network of 966 branches and 9,262 employees spread across 377 districts in 19 states and union territories in India. Fusion Micro Finance had the fourth fastest gross loan portfolio CAGR of 53.89 per cent between the financial years 2017 and 2021.
At the upper limit of the price band, the asking IPO valuations stood at 1.9 times adjusted FY22 book value per share (BVPS) and 168 times FY22 diluted EPS.
The issue comprised 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.
The net proceeds of the fresh issue would be used to augment the capital base of the microfinance firm.
Also Read: Stocks to buy: V-Mart Retail, GSPL, Medplus Health & Piramal Pharma
Also Read: Stocks in news: NMDC, Biocon, PB Fintech, SpiceJet and more