Akme Fintrade IPO: 10 Critical Risks Every Investor Must Know Before Subscribing

The IPO of Udaipur-based Akme Fintrade India was fully subscribed on its first day, with strong participation from both retail and non-institutional investors. The non-banking financial company’s ₹132 crore offering opened today and will remain available for two more days.

Akme Fintrade, a non-deposit taking NBFC (non-banking financial company) registered with the RBI, has over 20 years of experience in lending to rural and semi-urban areas in India. It focuses on providing financial solutions to meet the needs of people in these regions. The company offers vehicle finance and business loans for small business owners.

Comparable Companies and Financial Strategy

Akme Fintrade compares itself to companies like MAS Financial Services, Shriram Finance, Cholamandalam Investment and Finance Company, Arman Financial Service, and CSL Finance.

The company plans to use the funds from the IPO to strengthen its capital base to meet future business and asset growth needs. Some of the funds will also cover IPO-related expenses.

However, market analysts have highlighted several risks associated with Akme Fintrade India, such as financial inconsistencies, stiff competition, regulatory challenges, and high pricing.

Akme Fintrade India IPO: Key Risks

1. Declining Revenue: The company’s revenue dropped in FY 2022 and may continue to decline in the future.
2. High NPAs: Akme Fintrade has higher levels of non-performing assets (NPAs) compared to its peers, which could hurt its business if not managed effectively.
3. Geographic Concentration: The company operates mainly in Rajasthan, and its performance could suffer if it faces difficulties expanding to new areas.
4. Low Credit Ratings: The company has low credit ratings. Any further downgrades could affect its ability to meet obligations and secure future funding, impacting its operations and financial health.
5. Dependence on Business Loans: Akme Fintrade relies heavily on business loans. Any negative trends in this sector could adversely affect its business and financial condition.
6. Regulatory Compliance: The company requires various statutory and regulatory approvals to operate. Failure to obtain, maintain, or renew these on time could impact its business.
7. Legal Issues: Akme Fintrade, its promoters, and directors are involved in certain legal proceedings. Adverse outcomes in these cases could negatively affect the company.
8. Asset-Liability Mismatch: The company may face mismatches between its assets and liabilities, affecting its liquidity, operations, and profitability.
9. Operational Challenges in Rural Areas: Operating in rural and semi-urban regions with limited infrastructure could lead to higher costs and difficulties in loan collection.
10. Capital Adequacy: Failure to maintain its capital adequacy ratio could negatively impact the company’s operations.

These risks are detailed in the company’s Red-Herring Prospectus (RHP) and should be carefully considered by potential investors.