The initial public offering (IPO) of Akme Fintrade India opens for bidding on Wednesday, June 19. The company is selling its shares in the fixed price band of Rs 114-120 apiece. Investors with a lot size of 120 equity shares and its multiples thereafter until Friday, June 21.
Akme Fintrade India, incorporated in 1996, is a non-banking financial company (NBFC) with over 20 years of experience in lending to rural and semi-urban areas in India. It mainly provides lending solutions tailored to the needs and aspirations of rural and semi-urban populations. Its portfolio comprises Vehicle Finance and Business Finance Products for small business owners.
Akme Fintrade India is looking to raise a total of Rs 132 crore via IPO which entirely includes a fresh sale of 1,10,00,000 equity shares with no offer-for-sale (OFS) component. The net proceeds from the issue shall be towards augmenting the capital base of the company to fulfil its future capital requirements, and meeting issue-related expenses.
Brokerage firms remain mixed on the issue. Some suggest high risk appetite investors to subscribe to the issue on the back of demand for financial services and small issue size. However, others are skeptical on consistency of financial performance, high NPAs, and rich valuations of the company.
Akme Fintrade India boasts a strong presence in these underbanked segments and has demonstrated positive financial performance recently, several factors warrant careful consideration by potential investors, said Swastika Investmart which has a neutral (cautious) view in the IPO.
"The NBFC sector in India is highly competitive, demanding strategic differentiation to maintain market share. Akme Fintrade has faced compliance issues in the past, which further raises concerns. Its high NPAs and low credit rating indicate potential challenges. The IPO valuation further amplifies these concerns, appearing fully priced in the current market context," it cautioned.
Akme Fintrade is well established vehicle finance, small businesses lending business with customer centric approach and deep understanding of target customers and access to diversified sources of capital and effective asset liability management along with hub and spoke business model that improves efficiencies and decreases costs, said Anand Rathi Research.
At the upper price band company is valuing at P/E of 27.64 times, P/BV of 1.52 times with a market cap of Rs 512.1 crore post issue of equity shares and return on net worth of 7.72 per cent. We believe that the IPO is fairly priced and recommend a 'subscribe for long term' rating to the IPO," it said.
Akme Fintrade operates in rural and semi-urban areas across four Indian states - Rajasthan, Maharashtra, Madhya Pradesh, and Gujarat. It has a registered office in Udaipur, Rajasthan, and a Corporate Office in Mumbai, Maharashtra. With 12 branches and over 25 points of presence, including digital and physical branches, it has served over 200,000 customers.
A significant number of customers are in the rural & semi-urban markets, which may have limited infrastructure and cause higher cost of operations. A substantial portion of customers are first time borrowers which may have higher risk of non-payment or default, said Capital Markets in its note.
"In the vehicle finance business, there is potential risk due to decline in value of assets secured due to depreciation, deterioration, and/or a reduction in value on account of a number of factors. The company has implemented strong underwriting process and risk management policies," it added with an 'avoid' rating for the IPO.
Akme Fintrade reported a net profit of Rs 12.25 crore with a revenue of Rs 53.45 crore for the nine month ended on December 31, 2023. The company's bottomline stood at Rs 15.80 crore with a revenue of Rs 69.57 crore for the financial year ended on March 31, 2023.
On the financial performance front, the company’s revenue, ebitda and PAT degrew to Rs 69.5 crore, Rs 48.2 crore and Rs 15.8 crore in FY 2023. On the upper price band, the issue is valued at a P/E of 20.5 times based on FY2023 earnings, said StoxBox in its IPO note.
"Though the prospect for the company’s business segments look promising, we would look for more clarity and confirmation on the financial performance trajectory. We, therefore, recommend high risk-appetite investors to 'subscribe' to the issue for listing gains," it said.
Akme Fintrade India has reserved 50 per cent of the issue for the qualified institutional bidders (QIBs), while non-institutional investors have 15 per cent of the net offer. Remaining 35 per cent of the net offer shall be allocated towards retail investors.
Gretex Corporate Services is the sole book running lead manager of the Aasaan Loans IPO, while Bigshare Services is the registrar for the issue. Shares of the company shall be listed on both NSE and BSE with Wednesday, June 26 to be the tentative date of listing of shares.
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