Fusion Micro Finance shares tumble around 12% on NSE, BSE in debut trade – what should investors do?

Fusion Micro Finance share price on Tuesday after witnessing a weak stock market debut on Tuesday, tumbled around 12 per cent from its issue price to settle at Rs 325 and 323 per share levels on the BSE and NSE on the first day of the trading session.

The stock got listed at Rs 360.50, a discount of 2 per cent on the BSE. During the day, it declined 12.66 per cent to Rs 321.40. The stock later settled at Rs 324.90 apiece, lower by 11.71 per cent.

The counter dipped 10 per cent from its listing price of 368 per share. It touched a 52-week high of Rs 364.35 and Rs 341.4 as a 52-week low. Its market valuation stood at Rs 3,269.49 crore on the BSE. In volume terms, 7.49 lakh shares were traded on the BSE, and over 1.67 crore shares on the NSE.

Zee Business Managing Editor Anil Singhvi in his post-listing recommendation had said, “Short-term investors should put a stop loss of Rs 350, whereas long-term investors can HOLD.”

Earlier, Singhvi had advised to subscribe to this non-banking finance company’s IPO. He said, “One should subscribe to this IPO for returns in the long term. If they can make some money in the short term, nothing like that. There are chances of listing gains as well but don't expect major gains.”

Similarly, Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd said in its post-listing comment said that the company’s muted listing can be attributed to unexciting investor subscription levels, high valuation, and the OFS (Offer For Sale) nature of the issue.

The company's margins are now in decline mode, and it is facing risk due to the category of borrowers it serves, an increase in the level of NPAs (non-performing assets) could also be a concern for the company, Gour said in his quote while explaining the reasons for weak participation.

Secondly, the company demands a price-book (P/B) multiple of 1.8 on a post-IPO basis, whereas its peers like CreditAccess command a P/B of 3.3, the market analyst said, adding that those who applied for listing gains can maintain a stop loss of Rs 340 per share.

Fusion Microfinance is one such company that is among the top 10 NBFC MFIs 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.