IPO Note: Fusion Micro Finance Ltd By Swastika Investmart
Fusion Micro Finance : SUBSCRIBE
Incorporated in 1994, Fusion Micro Finance Ltd. works with female entrepreneurs that are part of the economically and socially underprivileged portion of society to provide them with financial services. The company's obligations extend beyond only providing financial assistance; they also include educating its clients about financial literacy so that they can better manage their money. Fusion Micro Finance Ltd is one of the youngest companies (in terms of getting an NBFC-MFI licence) among the top NBFC-MFIs in India in terms of AUM as of June 30, 2022.
* Company’s focus customer segment is women in rural areas with an annual household income of up to ?300,000. 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.
* key product offerings of company are income-generating loans that provide capital for women entrepreneurs in rural areas to fund businesses operating in the agriculture-allied and agriculture, manufacturing and production, trade and retail, and services sectors.
* 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.
* As of June 30, 2022 and March 31, 2022, 2021 and 2020, Its total AUM was ?73,890.23 million, ?67,859.71 million, ?46,378.39 million and ?36,065.24 million, respectively.
Outlook & Valuation: The microfinance industry has recorded healthy growth in the past few years, with microfinance lenders emerging in good numbers. Fusion Micro Finance is one such company which is among the top 10 NBFCMFIs 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. The company works with a strong focus on rural areas and has a well-diversified and extensive pan-India presence. The company also has access to diversified and recognised sources of capital and has a good financial track record. Although this company's margins are now in declining mode and it is facing risk due to the category of borrowers it serves, an increase in the level of NPA's 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, where its peers like creditAccess command a P/B of 3.3. Thus, considering all the factors, we recommend a Subscribe rating for this issue, but only for high-risk investors with a longterm view.
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An expected status quo: Monetary Policy review June 2023
Buy Fusion Micro Finance For Target Rs 720 -JM Financial Institutional Securities Ltd