Fusion MicroFinance debuts on a weak note; sheds 9% against issue price

The stock tumbled over 9 per cent to Rs 334.40 as against the issue price of Rs 368 per share on the BSE and the NSE in morning trade on Tuesday.

Fusion Micro Finance (FMFL) has made a weak stock market debut  with its shares falling over 9 per cent to Rs 334.40 when compared with its issue price on the BSE and the National Stock Exchange (NSE) on Tuesday.

The stock listed at Rs 360.50, down 2 per cent as against its issue price of Rs 368 per share on the BSE. On the NSE, it opened at Rs 359.50, the exchange data shows.

At 11:40 am, FMFL traded at Rs 335.55, down 8.8 per cent from its issue price, as compared to 0.15 per cent decline in the S&P BSE Sensex. A combined around 11.1 million shares changed hands at the counter on the NSE and BSE.

The Rs 1,104-crore initial public offering (IPO) of Delhi-based microfinance firm received decent response and was subscribed 2.95 times. The qualified institutional buyers (QIBs) portion was subscribed 8.59 times, while the portion reserved for non-institutional investors was subscribed 1.38 times. However, retail individual investors were subscribed just around 51 per cent or 0.51 times, the data showed.

FMFL provides financial services to unserved and underserved women in rural and semi-rural areas across India. As of June 30, 2022, total AUM stood at Rs 7,389 crore, with strong growth at 53.8 per cent CAGR in FY17-21. As of June 30, 2022, gross NPA ratio was at 3.6 per cent while net NPA was at 1.3 per cent.

FMFL's active borrowers grew at a CAGR of 33.6 per cent to 2.9 million (June 2022) served by 966 branches and 9,262 employees spread across 377 districts in 19 states and union territories in India.

The company has a history of serving rural markets with high growth potential in the microfinance segment, and maintained a track record of high rates of customer acquisition & retention with retention rates at 71.7 per cent for Q1FY23.

According to Crisil, FMFL had the sixth lowest gross NPA ratio among the top 10 NBFC-MFIs in India during FY22. Robust risk management policies & underwriting processes have resulted in healthy portfolio quality indicators.

According to analysts at ICICI Securities, FMFL is a strong player in a sustainably and well growing MFI sector with healthy growth and operational performance. The competition from other MFIs, banks and financial institutions, increase in NPAs may adversely affect business & earnings, and substantial collections & disbursements in cash exposes to operational risk, the brokerage firm said in IPO note.

FMFL has a pan-India presence and well diversified with proven execution capabilities with strong focus on rural areas and robust underwriting process and risk management policies with stable and experienced management team supported by marquee investors. It is having technologically advanced operating model and access to diversified sources of capital and effective asset liability management, the brokerage firm Anand Rathi Share and Stock Brokers had said in IPO note.