Fusion Microfinance IPO - 7 Things to Know

Fusion Microfinance, which is backed by PE firm Warburg Pincus, had filed for its draft red herring prospectus in mid-August 2021. It has just got the approval from SEBI and can now proceed to file the RHP with the ROC and complete other formalities to go ahead with the IPO. Here is a gist of the Fusion Microfinance IPO.
 

Seven things to know about Fusion Microfinance IPO

1) Fusion Microfinance gives small ticket loans to borrowers in the rural and semi-urban areas and largely operates with the unbanked sections of the population.

It operates in the same industry segment as other key players in India like Ujjivan Small Finance Bank, Equitas SFB, Suryoday Small Finance Bank, Bandhan Bank etc.

2) Fusion Microfinance had the early backing of Creation Investments and Honey Rose Investment, an arm of global PE giant Warburg Pincus.

The IPO of Fusion Microfinance will comprise of a fresh issue of Rs.600 crore plus an offer for sale of 2,19,66,841 equity shares. The final size of the offer will depend on the eventual price band of the IPO.

3) Out of the 2.197 crore shares that is being offered as part of the OFS, the two promoters Devesh Sachdev and Mini Sachdev will offer 13 lakh shares and 2 lakh shares respectively.

Early investors Creation Investment will offer 40 lakh shares while Honey Rose Investment will offer 63.21 lakh shares in the OFS. Other selling shareholders in the OFS include Oikocredit, Ecumenical Development and Global Financial Inclusion Fund.

4) The promoter group of Fusion Microfinance has 85.5% stake in the company while the other two selling shareholders jointly hold 12.03% in the company.

Fusion Microfinance may also consider a pre-IPO placement of Rs.120 crore, in which case the IPO size will be reduced proportionately. Anchor placement will be taken up closer to the IPO date.

5) For any microfinance institution, asset quality cycles are quite common as has been seen in a number of cases. Hence a solid capital adequacy is a must for these microfinance players.

The fresh issue proceeds of Rs.600 crore will be used to boost the capital base of the company and enhance its capital comfort to expand its book.

6) For FY21, Fusion Microfinance reported total revenues of Rs.873 crore and net profits of Rs.43.9 crore. The profits fell sharply in FY21 over FY20 due to the asset quality stress created by the pandemic which impacted loan servicing ability for many customers. 

7) The issue will be lead managed by ICICI Securities, CLSA India, IIFL Securities and JM Financial who will be the book running lead managers or BRLMs to the issue. The retail allocation in the IPO would be 35% and QIB at 50%.

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