Akme Fintrade IPO: 10 key risks investors should know before subscribing to the ₹132- crore issue

Estimated read time 15 min read

Akme Fintrade India IPO: Udaipur-based Akme Fintrade’s IPO was completely subscribed on the first day, with retail and non-institutional investors leading the way. The non-banking financial company’s 132 crore offering, which launched today, has two more days to navigate its way towards huge subscription numbers. 

The NBFC is registered with the RBI as a non-systemically important non-deposit taking organisation and has over 20 years of lending experience in India’s rural and semi-urban areas. The company’s principal focus is on providing finance solutions to rural and semi-urban people in order to suit their requirements and objectives. Small business owners can take use of the company’s vehicle finance and business finance products.

Also Read: Akme Fintrade IPO opens today: Check latest GMP, subscription status, key dates, more. Apply or not?

The company’s stated counterparts are MAS Financial Services (P/E of 26.47), Shriram Finance (P/E of 14.73), Cholamandalam Investment and Finance Company (P/E of 33.52), Arman Financial Service (P/E of 20.99), and CSL Finance (P/E of 22.70).

The firm aims to use the net proceeds of the offering to expand the company’s capital base in order to meet future capital requirements that are projected to arise as a result of business and asset growth. Furthermore, a portion of the proceeds from the issuance will be used to fund issue-related expenses.

However, market analysts point out that Akme Fintrade India Ltd has a history of financial irregularity, operates in a highly competitive and crowded business category, is subject to stringent regulatory requirements, and looks to be aggressively priced.

Also Read: Akme Fintrade IPO: Retail portion fully subscribed within the first 2 hours of Day 1. Check GMP and other key details

Let’s take a look at some of the key risks listed by the company in its Red-Herring Prospectus (RHP):

Akme Fintrade India IPO: Key Risks

  • The company’s revenue declined in Fiscal Year 2022 and may continue to do so in the future.
  • The firm has larger levels of NPAs than some of its peer companies, and as a result, its business may suffer if they are unable to cater for such high NPA levels.
  • The company’s commercial and operational presence is focused in the state of Rajasthan, and their results of operations may be harmed by challenges in growing their business or exploring new business possibilities in new areas and markets.
  • Their credit ratings are now low, and any future downward adjustment might have a negative impact on their capacity to service our obligations and raise financing in the future, damaging their operational performance and financial circumstances.
  • The firm relies heavily on business loans, and any negative developments in this sector, or in the other industries in which its business loan clients operate, might have a negative impact on their business, operations, financial position, and cash flows.

Also Read: Akme Fintrade IPO: From latest GMP to lot size, here are key things to know

  • Certain statutory and regulatory licenses and permissions are necessary to perform their company, and failure or omission to obtain, maintain, or renew these licenses and approvals on time, or at all, might have a negative impact on their business and operations.
  • Certain legal processes include the company, its promoters, and directors. Any adverse ruling in such procedures may have a significant negative impact on their business, operations, and financial situation.
  • The firm may encounter asset-liability mismatches, which might have a negative impact on its liquidity and, as a result, its operations, cash flows, and profitability.
  • The corporation may experience challenges and incur more costs while operating in rural and semi-urban regions with little infrastructure, and loan collection is also tough.
  • The company’s inability to maintain its capital adequacy ratio might harm its operations.

Also Read: Akme Fintrade IPO: NBFC garners 38 crore from anchor investors ahead of public issue

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.

 

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Published: 19 Jun 2024, 03:34 PM IST

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