Fusion Micro Finance shares made a lacklustre market debut on Tuesday despite a positive market sentiment. The non-banking finance company (NBFC) stock opened at a 2.3% discount against its issue price of Rs 368. The stock started trading at Rs 360.50 on the BSE, while the listing price on the NSE was Rs 359.50. Fusion Micro Finance IPO, which was open for Subscription from 2 to 4 November 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.
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Muted listing due to unexciting investor subscription, high valuation, OFS nature of IPO
“Fusion Micro Finance has debuted at Rs. 359 i.e. (-2.5%) over its issue price. The company’s muted listing can be attributed to unexciting investor subscription levels, high valuation, and the OFS nature of the issue. Fusion Microfinance is one such company that is among the top 10 NBFC MFIs in India. It offers loans to women entrepreneurs. Its business runs on a joint liability group-lending model, wherein a small number of women form a group and guarantee one another’s loans.” said Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd.
“The company’s margins are now in decline 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 command a P/B of 3.3. Those who applied for listing gains can maintain a stop loss of Rs 340,” he added.
Various brokerages 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. Fusion Micro Finance provides financial services to unserved and underserved women in rural and peri-rural areas across India. The company operates on a joint liability group-lending model, in which a small number of women, typically five to seven in numbers, form a group and guarantee each other’s loans.