Fusion Micro Finance surges 8% after 10% equity change hands on BSE

Shares of Fusion Micro Finance surged 8 per cent to Rs 606.45 on the BSE in Thursday’s intra-day trade after 10 per cent equity of the microfinance institution (MFI) changed hands on the bourses.

Till 09:24 AM; around 10.30 million equity shares representing 10.2 per cent of total equity of Fusion had changed hands on the BSE, the exchange data shows. The names of the buyers and sellers were not ascertained immediately.

According to media reports, Warburg Pincus was looking to sell around 9.25 per cent stake in Fusion through a block deal. The floor price was set at Rs 535 per share. Honey Rose Investment, an arm of global private equity firm Warburg Pincus, held 39.22 per cent stake in Fusion at the end of September quarter, the shareholding pattern data shows.
 

In past four months, till Wednesday, the stock of Fusion had underperformed the market and corrected 19 per cent from its record high of Rs 690 touched on August 1.

Fusion provides financial services to poor women and predominantly follows the joint-liability group model, wherein each group has 5-7 members. The loans are provided mainly for agricultural and allied activities, business activities, and establishment and expansion of micro enterprises. As on September 30, 2023, the company had a network of 1,088 MFI branches and 76 SME branches spread across over 420 districts within 22 states, with a strong focus on rural and semi-urban areas.

The company has grown its portfolio steadily and is among the top five MFIs in India. Its assets under management (AUM) rose 25 per cent YoY to Rs 10,026 crore as of September 2023 (Rs 9,296 crore as of March 2023).

The company focussed equally on asset quality improvement along with growth. Its GNPA improved to 2.7 per cent as on September 30, 2023 from 3.5 per cent as on March 31, 2023 and 5.7 per cent as on March 31, 2022.

CRISIL ratings in its rationale said Fusion did not sell any portfolio to asset reconstruction companies (ARCs) and wrote off Rs 307 crore (3.2 per cent of the portfolio as of June 2023) in the past 15 months. Collection efficiency has remained strong with low delinquencies for loans originated in the past 12-18 months. This has resulted in lower incremental credit costs.

The 'Stable' rating continues to reflect the experienced leadership and senior management team of Fusion, the company’s healthy capitalisation, and improving profitability and asset quality with sound risk management/audit processes. These strengths are partially offset by the inherently modest credit risk profile of borrowers, and potential risk from local socio-political issues inherent in the microfinance sector, CRISIL Ratings said.