IPO Alert: Fusion Micro Finance IPO hits the market. Is it worth subscribing to?

Should you subscribe to Fusion Micro Finance IPO?

 Fusion Micro Finance IPO

The IPO season is back again, as many companies are going public. An initial Public Offering (IPO) is the route through which an unlisted company can list its shares on the stock exchange. It also allows companies to raise capital from the public either through a fresh issue of shares or when its promoters look to dilute their stakes.

The latest company to offer its IPO is Fusion Micro Finance. Fusion Micro Finance is a Non-Banking Financial Company (NBFC) that offers financial services to the undeserving women living in the rural and peri-rural regions of the country.

Here are the details of the IPO.

Fusion Micro Finance IPO details

Fusion Micro Finance IPO details

Related - Know how the IPO price is decided.

Other details 

Offer for Sale (OFS) represents the stock held by promoters and other private shareholders that have been offered to the public. In the case of Fusion Micro Finance, the company's founder and Chairman, Devesh Sachdev, and his wife, Mini Sachdev, are offering up their stake for sale. Furthermore, the OFS includes the dilution of shares held by Honey Rose Investment and Creation Investments Fusion. A total of 13,695,466 shares will be sold through OFS.

Should you subscribe to the IPO?

Fusion Micro Finance IPO can be a good investment opportunity because of the following reasons –

  • The company is expected to consistently deliver a Return on Asset (ROA) of 4% and a Return on Equity (ROE) of 20%, provided there is no adverse event disrupting the microfinance sector.
  • The company's key financial metrics match those of the largest microfinance company CreditAccess. Compared to this, Fusion Micro Finance's valuation is 45% below that of CreditAccess. As such, you can subscribe to a company with stable financial health and invest at a reduced value.
  • The Grey Market Premium (GMP) is Rs.36 today, which might deliver returns if you sell the shares after allotment but before they are listed.
  • The company's total Assets under Management (AUM) were reported at Rs.73.89 billion, with a growth of 59% compared to the last year.

Related - Find out more about the grey market in an IPO

So, the IPO is a lucrative opportunity to invest in a company with good profitability prospects. You can buy the shares at a great value if you hit the IPO and the shares are allotted.

So, know the IPO window and subscribe if the investment matches your financial needs.

Watch the video to know whether to subscribe or avoid the Fusion IPO


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