Akme Fintrade (India) Limited IPO

AKME Fintrade (India) Limited has filed its DRHP with market regulator SEBI on Feb 16, 2023 to raise capital through IPO. The IPO of the Company consists of Fresh Issue only. The size of Fresh Issue is Fresh Issue of up to 1,10,00,000 Equity Shares aggregating up to ₹ [●] crore.

Business Model of the Company

The Company is a non-banking finance company (“NBFC”) incorporated in the year 1996 registered with the Reserve Bank of India as a Non-systemically important non-deposit taking company with over two decades of lending experience in rural and semi-urban geographies in India.

The Company is primarily engaged in rural and semi-urbancentric lending solutions to look after the needs and aspirations of rural and semi-urban populace. The portfolio of the Company includes Vehicle Finance and Business Finance Products to small business owners. The Company has a long history of serving rural and semi-urban markets with high growth potential and have maintained a track record of financial performance and operational efficiency through consistently high rates of customer acquisition and retention and low cost expansion into underpenetrated areas. Therefore, the Company strategically focuses on clients in the rural and semi-urban sector.

The digital lending platform www.aasaanloans.com is currently under development and will be rolled out in a phased manner. Initially the vehicle loans would be launched and the Business Finance would be rolled out for making the operational process easier and faster. The Company has taken a baby step towards the same by launching a website aasaanloans.com. This differentiated approach aids in the identification of businesses with low risk and high promise, thereby providing opportunities for those who previously had no access to long or short-term financing.Management of the Company

(i) Mr. Nirmal Kumar Jain, is the Chairman and Managing Director of the Company. He has been on the Board of Directors of the Company from August 25, 1996. He is a qualified Chartered Accountant. He has been awarded with CA Business Leader Corporate (2nd Rank) at the C.A. Corporate Leader Exxact Awards Function organized by Committee for Members in Industry of The Institute of Chartered Accountants of India on January 20, 2008 and Certificate of Appreciation for his voluntary work/sponsorship with Impetus (NGO) for charity work during the Kerala Flood Relief that was conducted from August 19, 2018 to August 25, 2018 by Impetus. He has more than 25 years of experience in the finance terrain. He has played a significant role in the growth of the Company.

(ii) Mr. Prashant Arvind Karulkar is an Additional Non-Executive Independent Director of the Company. He has been associated with the Company since January 16, 2023. He holds a degree in Bachelors in Commerce from S.R. Karandikar College of Arts and Commerce, Dahanu, Mumbai University. He holds a GNIIT Degree from NIIT Institute. He is honored and awarded by the Ministry of State, Finance, Government of India.

Object of the Issue

Fresh Offer

The Company proposes to utilize the Net Proceeds from the Issue towards augmenting its capital base to meet future capital requirements.

Further, the Company expects to receive the benefits of listing of the Equity Shares, including enhancement of the visibility and the brand image among the existing and potential customers as well as vendors and creation of a public market for the Equity Shares in India.

Risks in the IPO

The Company, the Promoters and the Directors are parties to certain legal proceedings

The Company, the Promoters and the Directors are parties to certain legal proceedings. These legal proceedings are pending at different levels of adjudication before various courts, tribunals and forums. Any adverse decision in such proceedings may have a material adverse effect on the business, results of operations and financial condition.

The Company requires substantial capital for its business

The business and results of operations of the Company depends on its ability to raise both, debt and equity from various external sources on suitable terms and in a timely manner. The financing requirements historically have been met from several sources, including term loans and working capital facilities; proceeds from loans securitized; proceeds from the issuance of NCDs; and debt from other domestic and international financial institutions to meet the capital requirements. Any disruption in the sources of capital could have an adverse effect on the business, results of operations and financial condition.

The risk of non-payment or default by borrowers

The Company primarily serves customers in the low and middle-income groups, with majority of the borrowers being small business owners, salaried or working class individuals, and self-employed individuals. A significant portion of the customer base is typically less economically stable than large corporations, and non-payment or default by the borrowers may adversely affect the business, results of operations and financial condition.

The Company is affected by volatility in interest rates

The results of operations depend substantially on the level of the net interest income, which is the difference between the interest and other income charges, and interest expense and other borrowing costs. Any change in interest rates would affect the interest expense on the floating interest-bearing liabilities as well as the net interest income and net interest margins.

The Company operates in a highly competitive industry

The Company operates in a highly competitive industry. Given the diversity of the businesses, and the products and services which each of those issue, the Company faces competition from the full spectrum of public sector banks, private sector banks (including foreign banks), small finance banks, financial institutions and other NBFCs who are active in business finance and vehicle finance. The inability to compete effectively may adversely affect the business.

Financial Performance

As per the financial statements of the Company, here are Financial Highlights for FY22 compared to FY21

In FY22, the total revenue of the Company decreased 23% to Rs. 67 crore as against Rs. 88 crore in FY22. In FY22, the total expenses decreased 13% to Rs. 60 crore as against Rs. 69 crore in FY21. In FY22, the profit before tax of the Company decreased 63% to Rs. 7 crore as against Rs. 19 crore in FY21. The profit after tax of the Company decreased 75% to Rs. 4 crore as against Rs. 16 crore in FY21.

In FY22, the total assets of the Company were Rs. 374 crore as against Rs. 455 crore in FY21. In FY22, the total equity and liabilities of the Company were also Rs. 374 crore as against Rs. 455 crore in FY21.

In FY22, the net cash generated from operating activities of the Company was Rs. 65 crore as against Rs. 86 crore in FY21. In FY22, the total cash generated from investing activities of the Company was Rs. 1 crore as against Rs. 2 crore in FY21. In FY22, the total cash used in financial activities of the Company was Rs. (77) crore as against Rs. (85) crore in FY21. In FY22, the total cash and cash equivalents at the end of the year of the Company was Rs. 74 lakhs as against Rs. 10 crore in FY21.