Warburg Pincus backed Fusion Microfinance files draft IPO papers with SEBI; will raise over Rs 600 cr

Fusion Microfinance has filed its draft IPO (Initial Public Offering) papers with the capital markets regulator SEBI. Backed by private equity firm Creation Investment and an arm of Warburg Pincus, Fusion Microfinance is a financial services firm serving in rural and semi-rural India. The company is looking to raise Rs 600 crore from a fresh issue of equity and an offer for sale (OFS) by existing shareholders including promoters Devesh Sachdev, Creation Investments Fusion, and Warburg Pincus backed Honey Rose Investment. On listing the company could join listed peers such as Ujjivan Small Finance Bank, Suryoday Small Finance Bank, and Bandhan Bank among others.

Fusion Microfinance is looking to raise Rs 600 crore as part of the IPO through and issuance of fresh equity shares along with an OFS of 2,19,66,841 equity shares. Of this up to 13,00,000  shares will be sold by Devesh Sachdev, up to 2,00,000 by Mini Sachdev, up to 63,21,375 by Honey Rose Investment, 40,00,000 by Creation Investment Fusion. Other selling shareholders will include Oikocredit, Ecumenical Development Co-operative Society U.A and Global Financial Inclusion Fund.

From the funds raised through the fresh issue, Fusion Microfinance said, it will increase the capital base of the Company. Funds raised through the OFS will go towards the selling shareholders. Prior to the IPO, promoters and Promoter Group of Fusion Microfinance hold more than an 85.5% stake in the company. The other two selling shareholders of the company together hold a 12.03% stake in the company. Fusion Microfinance said it could go for a pre-IPO placement of Rs 120 crore.

According to the DRHP, Mini Sachdev — on the selling shareholders, acquired 4,500 equity shares of the company in one year prior to the filing of DRHP at an average cost of Rs 290.48 per share. Meanwhile, promoter Devesh Sachdev’s average cost of acquisition of his entire shareholding is Rs 117.61, while the cost of acquisition for Warburg Pincus’ Honey Rose Investment is reported at Rs 194.94 per share. 

Fusion Microfinance has seen its income grow from Rs 497 crore in the financial year 2018-19 to Rs 873 crore in the previous financial year. Net profit of the company was Rs 50 crore in the financial year 2018-19, which increased to Rs 69 crore in the financial year 2019-20 before falling to Rs 43.9 crore in the previous covid-struck financial year. Half of the IPO of Fusion Microfinance will be reserved for Qualified Institutional Buyers, while retail investors can bid for 35% of their issue. Non-Institutional Investors will get to subscribe 15% of the IPO size, the DRHP said.