Devesh Sachdev founded Fusion Microfinance in 2010 and is currently is the CEO and the Chairperson of the company. Today, the company operates around 2.12 million active customer base through its 725 branches spread across 18 States& Union Territories and 326 districts. The company’s operational model is to support women of the Semi-Urban and Rural Areas by providing financial and banking facilities. They focus on women’s support to eradicate any economic and social deprivation in society. The company has adopted the same approach that has been adopted by Grameen’s Joint liability group lending model. In this article, we take a closer look at the Fusion Microfinance IPO Review and its possible future prospects.
OBJECTS OF THE IPO ISSUE:
- Prepayment of all the loans of the company, which be availed on a consolidated basis.
- To meet corporate targets.
- To increase the capital base of the company.
- To fund the working capital requirement.
BASIS OF THE FUSION MICROFINANCE IPO OFFER:
- The company has a PAN -India presence with a well-diversified service portfolio.
- Fusion Microfinance has a well developing and broad value of the service and their company.
- The company in the past have exhibited their business execution with a strong focus only on rural division; they intend to replicate the same with the urban division.
- The company has access to different and many funding sources.
- It also has a very efficient and effective asset-liability management system.
- The company follows thorough Risk management and underwriting procedure and guidelines.
- The company operates on a business model that is very well and technologically sound.
- The company has an experienced and excellent promoter, management, and working staff base.
FUSION MICROFINANCE IPO DETAILS:
Fusion Micro Finance limited, a small-scale NBFC headquartered in Delhi, recently submitted their DRHP to the SEBI. The company is currently waiting for approval from SEBI to float its IPO in the market. The IPO of the company consists of an issue of fresh equity worth Rs. 600 Crore and an OFS been brought by the promoters and the selling stakeholders of 2,19,66,841 equity shares. The company also mentioned that it might consider a pre-IPO placement of Rs.120 Crore inclusive of the IPO offer. Check Day by Day IPO Subscription Details (Live Status)
Through the OFS, the following will offload their stake in the company:
| Devesh Sachdev | 1.3 million equity shares |
| Mini Sachdev | 0.2 million equity shares |
| Honey Rose Investment | 6.32 million equity shares |
| Creation Investments Fusion LLC | 4 million equity shares |
| Oikocredit Ecumenical Development Co-operative Society UA | 6.61 million equity shares |
| Global Financial Inclusion Fund | 3.54 million equity shares |
| IPO Opening Date | |
| IPO Closing Date | |
| Issue Type | Book Building Type |
| Face Value | Rs.10/ Equity Share |
| IPO Price | |
| Market Lot | |
| Min Order Quantity | |
| Listing At | BSE, NSE |
| Issue Size | – |
| Fresh Issue | Rs. 600 Crore |
| Offer for Sale | 2,19,66,841 equity shares |
| Basis of Allotment Date | |
| Initiation of Refunds | |
| The Credit of Shares to Demat Account | |
| IPO Listing Date | |
| Basis of Allotment Type | % Of the allotment of the IPO Offer |
| Qualified Institutional Buyer | 50 |
| Non-Institutional Investor | 15 |
| Retail | 35 |
FINANCIAL TRENDS OF FUSION MICROFINANCE IPO:
| PARAMETER | MARCH 21 | MARCH 20 | YoY % |
| Core EBITDA Margin (%) | 48.90 | 59.73 | -18.12 |
| EBIT Margin (%) | 50.47 | 60.76 | -16.95 |
| Pre-Tax Margin (%) | 6.64 | 13.88 | -52.20 |
| PAT Margin (%) | 5.13 | 9.66 | -46.87 |
| Cash Profit Margin (%) | 5.59 | 10.02 | -44.23 |
| ROA (%) | 0.88 | 1.83 | -51.91 |
| ROE (%) | 3.61 | 7.68 | -52.97 |
| ROCE (%) | 8.77 | 11.76 | -25.47 |
| Asset Turnover(x) | 0.17 | 0.19 | -9.49 |
| Sales/Fixed Asset(x) | 45.38 | 57.40 | -20.94 |
| Working Capital/Sales(x) | 1.03 | 1.34 | -22.93 |
| Fixed Capital/Sales(x) | 0.02 | 0.02 | 26.48 |
| Receivable days | 1.26 | 0.95 | 33.19 |
| Inventory Days | 0.00 | 0.00 | 0.00 |
| Payable days | 13.57 | 4.09 | 231.43 |
| Net Sales Growth (%) | 18.82 | 48.12 | -60.89 |
| Core EBITDA Growth (%) | -1.01 | 31.49 | -103.21 |
| EBIT Growth (%) | -1.32 | 31.66 | -104.17 |
| PAT Growth (%) | -36.87 | 6.52 | -665.90 |
| EPS Growth (%) | -36.94 | -16.39 | -125.39 |
| Total Debt/Equity(x) | 3.58 | 2.49 | 43.64 |
| Current Ratio(x) | 2.55 | 2.75 | -7.48 |
| Quick Ratio(x) | 2.55 | 2.75 | -7.48 |
| Interest Cover(x) | 1.15 | 1.30 | -11.17 |
| Particulars | For the year with amount in Crore | ||||
| 31-Mar-21 | 31-Mar-20 | 31-Mar-19 | |||
| Total Assets | 5,837.93 | 4,239.99 | 3,610.52 | ||
| Total Revenue | 873.09 | 730.31 | 497.05 | ||
| Profit After Tax | 43.94 | 69.61 | 50.67 |
WEAKNESS AND THREATS OF FUSION MICROFINANCE IPO:
- The Covid-19 Virus has led to an unknown and everlasting impact on the NBFC’s and especially MFI’s.
- The company has increased their NPA’s that are Non-Performing Assets on their books, as a result of which a high amount of provisioning is done by the company in the recent quarters.
- The company may also be impacted due to any disruption on the financial front, resulting in which the financial margins and ratios can record a negative impact.
- Even being an MFI, the company has expanded to a large geographical network and many offices and branches, due to which it may encounter a type of operational hazard.
- The company needs to comply with the strict guidelines laid by the Ministry of Finance, DIPAM, Ministry of Commerce, and the RBI, and other statutory guidelines. Any non-compliance may land up the company with tremendous operational loss.
- The company is vulnerable to the threat of the modest credit profile of its clients. It majorly carries out microfinancing for clients with below-average risk and credit profiles. It always puts the company on the threat of default of those loans as the income flow of these people is highly volatile and highly dependent on the economic, cultural, and socio-political aspects. The company operates in a business sector where it faces competition from many organized and unorganized market players. The sector of Microfinance has become very challenging and competitive nowadays.
- The company is also vulnerable to any breach in security, physical well as Cyber Security. It is also vulnerable to the threats been imposed on Data Privacy. It is also vulnerable to the threat of the management and operation of the cash.
- The company is also exposed to the vulnerability of the credit rating. It can lead to a negative impact on the company’s reputation.
- The company, along with its directors, are subject to trial under a legal procedure.
- COVID-19 also impacted the company in terms of delinquency levels and collection efficiency.
- Any negative commentary by the company on the front of Asset Quality can have a detrimental impact on their business.
STRENGTHS AND GROWTH ASPECTS:
- The firm has been backed by many rich PE firms and investors pedigree such as Creation Investments Capital Management and Warburg Pincus.
- Fusion Microfinance has the growth upfront due to the immense scope in NBFC and MFI having an under-penetration in the sector.
- In FY20, the company had a cash disbursement of Rs.3572.8 Crores. In the same year, it recorded an AUM, Assets under management as of Rs.3606.52 Crores. The company also registered a healthy balance sheet size of Rs.4240 crores.
- In terms of the AUM, Fusion Microfinance was one of the top ten NBFC-MFIs of India.
- It also experienced one of the largest and was ranked third in the most growing gross loan portfolio since last 3 years from 2018 to 2021.
- The company has a strong geographical reach been supported by its diversified service portfolio and a varied distribution network.
- It is the market leader as an NBFC, MFI operating in the remote rural places of the country.
- The company has a strong liquidity position supported by healthy cash flows, strong fundamentals, and a business operation model.
- Till now, the company has conducted its business execution with a proper risk management system. It helped the company carry out its growth plans in the existing and find way opportunities in the new sector of operation.
- The proper maintenance of their asset quality performance benefitted them with an increase in their AUM. It registered an increase of nearly 36% on a YoY basis.
- The company has the smallest gross loan portfolio per client per district in the top NBFC and MFIs of the country. It makes sure that the company is not exposed to any risk of a major default and enables growth with a better expansion plan.
- The company is continuously recording a healthy risk profile, resource profile due to its expanding business operations. It is also due to a registered improvement in their asset quality.
- The company improved on the parameter of the Gearing ratio. The current ratio is at 2.8 times that led to a better capitalization front from last year. In last year the same ratio was at 5 times.
- The company also marked an increase in its earnings profile. As a result, it registered a healthy internal accrual and a significant increase in its net worth.
PROMOTERS:
- Devesh Sachdev
- Creation Investments Fusion LLC
- Creation Investments Fusion II LLC
- Honey Rose Investment Ltd
| Pre-Issue Share Holding | 85.21% |
| Post Issue Share Holding |
CONTACT DETAILS:
Fusion Microfinance Limited
H-1, C Block, Community Centre, Naraina Vihar,
New Delhi, 110028, India
Telephone: +91-124-6910500
E-mail: companysecretary@fusionmicrofinance.in
Website: www.fusionmicrofinance.com
REGISTRAR:
Link Intime India Private Limited
C 101, 247 Park, L. B. S. Marg
Vikhroli (West), Mumbai 400 083
Maharashtra, India
Tel: +91 22 4918 6200
E-mail: fusion.ipo@linkintime.co.in
Website: www.linkintime.co.in
LEAD MANAGER(S):
- ICICI Securities Limited
- CLSA India Private Limited
- IIFL Securities Limited
- JM Financial Limited
