Evaluating Akme Fintrade (India) Ltd IPO opportunity; Should you invest?

In this analysis, we take a closer look at Akme Fintrade (India) Ltd and present you with the exclusive IPO details.

About the Issue  

Akme Fintrade (India) Ltd is set to launch its initial public offering (IPO) for equity shares, each with a face value of Rs 10. The IPO price range is set between Rs 114 and Rs 120 per equity share, resulting in a total issue size of Rs 132 crore at the upper price band.  

The IPO is scheduled to commence on June 19, 2024, and will conclude on June 21, 2024. The market lot size for the IPO is 125 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 1,625 shares or a total investment of Rs 1,95,000 assuming the upper price band.

Objects of the Issue  

Considering that the offer consists solely of a fresh issue, it is important to note that the company will directly benefit from the proceeds. The company intends to use the net proceeds from the fresh issue to enhance its capital base, addressing future capital needs anticipated from business and asset expansion.

Promoter holding  

Nirmal Kumar Jain, Manju Devi Jain, Dipesh Jain and Nirmal Kumar Jain HUF are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 56 per cent in the company.

Company profile  

The company, a non-banking finance company established in 1996, is registered with the Reserve Bank of India as a non-systemically important non-deposit-taking company. It has over two decades of lending experience in rural and semi-urban areas in India. The company operates in four states including Rajasthan, Maharashtra, Madhya Pradesh, and Gujarat. It has its registered office in Udaipur, Rajasthan, and its corporate office in Mumbai, Maharashtra.

The company’s portfolio includes vehicle finance and business finance products for small business owners. Its digital lending platform, www.aasaanloans.com, is currently under development and will be rolled out in phases. The platform is currently deployed to a select group of users for User Acceptance Testing (UAT), with the initial phase focusing on two-wheeler finance.

Concurrently, the IT team is actively developing products for loans against property, commercial vehicle financing, and secured business loans, which will also be introduced in phases.

Financials  

The company experienced a major setback in FY22, with revenue dropping by over 20 per cent and net profit plunging by 75 per cent. It has not been able to match the revenue levels of FY21. Additionally, the figures for the first nine months of FY24 have been disappointing, comparable to last year's results when annualized. This indicates no growth for the entire fiscal year if the current trend continues.

Valuation and outlook  

The issue is priced with a P/BV ratio of 1.75 times, calculated using its Net Asset Value (NAV) of Rs 68.51 as of December 31, 2023. When we calculate the PE ratio for the company by considering the annualized FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 23.

Considering the peer comparison, other listed stocks are available at lower valuations and are offering higher returns. Additionally, the company's financials are not particularly appealing. Additionally, the company’s digital lending platform is still under development and will be completed in phases, requiring some time to be fully operational. 

Therefore, we advise investors to avoid this expensive bet due to its uncertainties and associated risks.