After muted debut, should you hold Fusion Micro Finance for the long term?

New Delhi: In line with trader's expectations, Fusion Micro Finance made a muted debut on Dalal Street on Tuesday.

The young microfinance player's scrip got listed at Rs 359.50 at the National Stock Exchange (NSE) and at Rs 360.50 at BSE, a discount of 2% to its issue price of Rs 368 apiece.

However, the pain in the counter intensified as the scrip dropped another 5% to Rs 341.10, taking the total loss to more than 7% for investors.

Analysts have a muted outlook on the stock in the near-to-medium run suggesting that only high-risk investors should hold the stocks, whereas others can book the losses and exit.

Pravesh Gour, Senior Technical Analyst, Swastika Investmart said that its muted listing can be attributed to unexciting investor subscription levels, high valuation and the OFS nature of the issue.

"Its margins remain in decline mode and the company faces a risk from the category of borrowers it serves. An increase in the level of NPAs could also be a concern for the company," he added. "Those who applied for listing gains can maintain a stop loss of Rs 340."

The initial public offering (IPO) of Fusion Micro Finance was open for subscription between November 2-4 as the company sold its shares in the range of Rs 350-368 apiece to raise Rs 1,104 crore via initial stake sale.

The issue was overall subscribed 2.95 times, with the quota for qualified institutional bidders getting 8.6 times subscription, whereas the HNI portion was booked 1.38 times. Retail investor portion was subscribed merely 51%.

Manoj Dalmia, Founder & Director at Proficient Equities said the grey market was signalling a muted listing and the issue was not highly subscribed during the bidding process.

"Investors, who applied for the shares only for listing gains, can book at the listing price, whereas others can hold for a mid-to-long term," he added.

Incorporated in 1994, Fusion Micro Finance is engaged in providing financial services to women entrepreneurs belonging to the economically and socially deprived section of society.

It has 2.90 million active borrowers with a network of 966 branches and 9,262 permanent employees spread across 377 districts and 19 states and union territories.

Ravi Singhal, CEO, GCL Securities said investors should invest in other pre-listed financial players or lenders. He advised investors to exit on listing.

CRISIL’s Ratings upgraded its long-term rating on the bank facilities and non-convertible debentures of Fusion Micro Finance to ‘CRISIL A/Stable’ from ‘CRISIL A-/Stable’ ahead of its listing today.

The revision in the rating is driven by a substantial increase in the capital position of the company and an expected improvement in profitability.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)