Fusion Microfinance IPO, the microlender backed by global PE major Warburg Pincus, will open for public subscription on Wednesday, November 2, 2022 and will close on Friday, November 4, 2022. Fusion Microfinance IPO comprises a fresh issue of equity shares worth ₹600 crore and an offer of sale of 13,695,466 equity shares.

Bidding date 2nd Nov’2022-4th Nov’2022
Issue Size  (₹ Cr)1,103.99 Cr ( 600 cr Fresh issue + 504.00 cr OFS)
Face Value in Rs. 10
Bid Lot shares40
Price Band in Rs.350-368
Issue Structure :

About Fusion Micro Finance

  • Fusion Micro Finance was incorporated in 1994.
  • Fusion Micro Finance Ltd is engaged in providing financial services to women entrepreneurs belonging to the economically and socially deprived section of the society.
  • Besides providing financial support, but also to acquaint the clients to manage their finances by disseminating Financial Literacy to them.
  • The New Delhi-headquartered microfinance company provides financial services to underserved women across India to facilitate their access to greater economic opportunities. The company’s business runs on a joint liability group-lending model, wherein a small number of women form a group (typically comprising five to seven members) and guarantee one another’s loans.
  • As of June 30, 2022 and March 31, 2022, its total AUM was Rs. 7389 crore, Rs. 6785.97 Crore respectively.
  • The company have achieved a significant footprint across India, where the company have extended its reach to 2.90 million active borrowers which were served through its network of 966 branches and 9,262 permanent employees spread across 377 districts in 19 states and union territories in India, as of June 30, 2022.

Anchor Book: Fusion Microfinance IPO

In Fusion Microfinance anchor book total of 89,99,943 shares were allotted to a total of 17 anchor investors. The allocation was done at the upper IPO price band of Rs.368 for Rs.331.20 crore. Top 2 anchors took 24.18% of the anchor allocation.

Fusion Microfinance IPO: Financials

Particulars/ Rs Cr.Q1FY22Q1FY22Fiscal 2022Fiscal 2021Fiscal 2020
Total revenue from operations342.00259.001,151.00855.00720.00
Profit for the period/year75.14.121.743.969.6
Equity share capital827.84790.66827.6790.37789.5
Other equity13,336.8111,725.8512,551.9111,673.1811,199.39
Total equity*14,164.6512,516.5113,379.5112,463.5511,988.89
Net asset value per equity share**171.1151.5161.67150.92145.32
Post Issue share Cap100.63
FV in Rs. 10
IPO price368
EPS post IPO FY222.16
PE ’22170.4
EPS FY23 ann29.85
PE  FY23 ann12.3
Market Cap Rs. Cr. 3703
Market Cap/Sales3.22
P/adj BV1.90

Salient Points

  • Pre-offer Honey Rose Investment (Warburg) directly owns 48.65% in the company and together the two Creation Investments Fusion funds, Oikocredit Ecumenical Development, Global Financial Inclusion Fund holdi 36.56% and the Sachdevs 8.21%.
  • As of June 30, 2022, Fusion Microfinance share of AUM from customers in rural areas represented 91.37% of its total AUM.
  • The focus customer segment for the company is women in rural areas with an annual household income <= ₹300,000.
  • Fusion Microfinance undertook expansion and spending from FY20 to FY22 despite the pandemic
  • 54% of its Rs. 7,400 cr AUM is concentrated in 4 states.(Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh).


  • Risks associated with our large number of branches and widespread network of operations
  • a large portion of collections and disbursements from customers are in cash, exposing it to certain operational risks.
  • Any disruption in sources of funding or increase in costs of funding could adversely affect liquidity and financial condition

Fusion Microfinance IPO: Peers

 CompanyTotal Income (₹ million)FV (₹)P/EEPSRoNW (%)NAV
Fusion Micro Finance Limited*12,013.4910NA2.641.63161.67
Credit Access Grameen27,501.301042.623.228.98255.19
Spandana Sphoorty 14,800.351052.7610.722.26447.21
Ujjivan SFB31,260.7410#NM-2.4-14.7916.22
Equitas SFB39,972.261020.212.46.6133.91
  • The listed peers of Fusion Microfinance include Credit Access Grameen Ltd, Spandana Sphoorty Financial Ltd, Bandhan Bank, Ujjivan Small Finance Bank, Equitas Small Finance Bank, and Suryoday Small Finance Bank.
  • Fusion Microfinance, RoNW is 1.63% which is lower than peers like Credit Access, Spandana, and Equitas Small Finance Bank.
  • The PE of Fusion Microfinance on FY23 annualized basis baded on Q1FY23 results is 12.3x

Fusion Microfinance IPO: Assessment

  • Fusion Microfinance also had the third-fastest gross loan portfolio growth of 44% among the top NBFC-MFIs in India between the financial years 2018 and 2021, according to CRISIL.
  • Fusion Microfinance tops among NBFC-MFIs in clients per branch and also in clients per employee.
  • Amongst top NBFC-MFIs, Fusion Microfinance has the highest share of rural clients at 93%
  • Fusion Microfinance has a well diversified and extensive pan-India presence
  • It has a good access to Diversified Sources of Capital
  • Fusion Microfinance has a robust underwriting process and risk management policies.
  • The company has an experienced management team supported by marquee investors.
  • Fusion Microfinance has proven execution capabilities with a strong rural focus.
  • Warburg Pincus and Creation Investments, are classified as promoters,and will be holding 63% stake post IPO. They may exit at some point of time.
  • stake of promoteres sans these PE funds is low at 7.5% which will further come down after the IPO.
  • The post-issue P/B works out to 1.9x on the adjusted FY22 BV. CreditAccess Grameen is trading P/Adj BV (of 3.4x, Spandana Sphoorty Financial at 1.5x and Satin Creditcare Network at 0.8x.
  • Though it posted strong growth in top lines, it recorded declining profits due to the pandemic.
  • There are presently strong tailwinds in banking sector accompanied by an uptick in credit cycle.
  • This is also reflected in strong Q1FY23 results posted by the company.
  • Based on FY22 earning the valuations are quite stretched with P/E of 168x FY22 Diluted EPS, but if one annualizes Q1FY23 earning the PE is reasonable compared to peers and stands at 12.3x
  • Fusion’s credit rating of A- is lower than peer Spandana’s ‘A’ rating thus increasing fund costs and lower spread.
  • on a TTM basis P/E works out to ~ 40x for EPS of TTM ended June 2022. CreditAccess Grameen is trading at PE of 31.1x of annualized EPS for TTM for this period.
  • Iam not likely to apply for IPO even though the sector has some tailwinds and company has some merits.

Fusion Microfinance IPO: Apply or Not

Risk : Moderate
Expected Reward : Low Profit / Low to moderate loss
Listing Gains : Not sure
Hold for Medium/ Long Term: No view
Subscription : to be watched till Day 3
I am not likely to apply to Fusion Microfinance IPO. Will apply only if there is very good QIB traction on Day3.
Above are my views only. Please do your own diligence.

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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