Akme Fintrade India Ltd

Aasaan Loans!

1|Page (18th June 2024) For any further query, please email us on research@venturasecurities.com
 Akme Fintrade India Ltd

Subscribe

Valuations seem pricey

Established in 1996, Akme Fintrade India Ltd is a non-banking financial Industry Financial Services
company (NBFC) with more than two decades of experience in providing
lending solutions tailored to rural and semi-urban communities in India. Issue Details
Listing BSE & NSE
Open Date 19th June 2024
Specializing in Vehicle Finance and Business Finance Products, Akme
Close Date 21st June 2024
Fintrade caters primarily to small business owners in Rajasthan,
Price Band INR 114-120
Maharashtra, Madhya Pradesh, and Gujarat. The company's headquarters
are in Udaipur, Rajasthan, with a corporate office in Mumbai, Maharashtra.
Face Value INR 10
It operates through 12 branches and over 25 points of presence,
Market Lot 125 shares
encompassing both digital and physical locations, serving a customer
Minimum Lot 1 Lot
base exceeding 200,000.

Akme Fintrade operates two primary lines of business. The first is Vehicle Issue Structure
Fresh Issue (%) 100.0
Financing, which includes financing for Used Commercial Vehicles, Two-
Wheeler Loans, and Used Two-Wheeler Loans. This segment requires a Issue Size (INR cr) INR 132.0
larger sourcing team due to the company's expertise in assessing risks Issue Size (Shares) 1,10,00,000
associated with customers having limited credit histories, especially in QIB Share (%) ≤ 50%
financing used vehicles. Non-Inst Share (%) ≥ 15 %
Retail Share (%) ≥ 35 %
As of December 31, 2023, the Vehicle Finance Credit Exposure stood at Pre issue sh (nos) 3,16,74,996
₹7,879.63 lakhs. The customer base primarily consists of transport Post issue sh (nos) 4,26,74,996
operators, small businesses, self-employed individuals, and salaried Post issue MCap 512.10
professionals, who typically contribute between 10.00% and 30.00% of (INR cr)
the asset's purchase price, with the remainder financed by Akme Fintrade.
Loans are secured through hypothecation of the financed assets. Shareholding
Pre (%) Post (%)
(%)
Promoter 56.01 41.6
The second line of business is Business Finance, aimed at small business
Public 43.99 58.4
owners and SME/MSME enterprises. Akme Fintrade operates primarily in
Rajasthan, Madhya Pradesh, Gujarat, and Maharashtra, with its TOTAL 100 100
headquarters in Udaipur.

At the IPO price of INR 120 (upper price band), Akme Fintrade India Ltd
India Ltd is valued at PE multiple of 20.33 times.

Key Financial Data (INR Cr, unless specified)

NIM PAT Adj BVPS RoA RoE P/E P/BV

NII PPOP PAT
(%) (%) EPS (₹) (₹) (%) (%) (X) (X)

FY21 8,416.9 2,690.9 1,629.6 7.9 19.4 6.7 18.3 3.6 12.5 18.0 6.6
FY22 6,486.9 1,819.9 411.1 7.2 6.3 1.7 21.1 1.0 3.2 71.4 5.7
FY23 6,311.0 2,362.0 1,579.0 9.3 25 5.9 23.2 4.1 7.7 20.5 5.2

2|Page (18th June 2024) For any further query, please email us on research@venturasecurities.com
 Growth Strategies

Sizable Rural Population

Despite the pace of urbanization & rural to urban migration that has happened in India
for the past two decades, 70% of the total population and approximately 65% of the
total households in India is still concentrated in the rural market. This underlines the
importance of rural market. The shift in economic profile meant, the share of
agriculture to total economic output has gone down. Hence the impact that
agriculture has on overall economic growth is lower. However, the sheer size of rural
population meant it accounts for a huge pool of consumer base – albeit which is
untapped. The existing institutional credit agencies primary meet the agri credit
needs of this population, while non agri credit demand is not met. This presents a
huge untapped opportunity.

Medical Needs
Only 8 – 10% of population in rural Indian has life insurance coverage while less than
20% has any sort of insurance coverage. Such a low insurance penetration means out
of pocket expenditure remains the main source of funding for medical needs. The
average household income in rural India is estimated to be INR 165,000 – INR 170,000
out of which bulk is spend on daily sustenance leaving little for emergency needs. As
per 75th round of NSS survey, average hospitalization expense in rural India is
estimated to be nearly INR 17,000. Given non-existent health insurance penetration,
the healthcare expense is met mainly through out-of-pocket expenditure and has
become a major financing demand in rural markets.

Key Risks and Concerns

• Akme Fintrade India Ltd India Ltd acknowledges historical non-compliance

with certain RBI norms and guidelines, which could potentially result in
penalties and restrictions due to violations of RBI regulations.

• Previous RBI inspection reports have highlighted several operational

deficiencies and observations related to (a) concentration of
credit/investment, (b) scope of audit, (c) adherence to KYC norms, (d)
compliance with fraud monitoring, asset liability management, and risk
management, and (e) the necessity of obtaining prior RBI approval for
acquisition or transfer of control.

• Akme Fintrade India Ltd India Ltd has previously conducted issuances and
allotments of equity shares that may not have complied with the provisions
and rules stipulated in the Companies Act, 1956. The company cannot assure
that it will avoid facing complaints or penalties in the future related to these
violations.

3|Page (18th June 2024) For any further query, please email us on research@venturasecurities.com
 Issue Structure and Offer Details

The proposed issue of Akme Fintrade India Ltd India Ltd is solely a fresh issue of 1.1
crore shares aggregating to Rs 132 crores. The price band for the issue is in the range
of INR 114-120 and the bid lot is 125 shares and multiples thereof.

Issue Structure

Investor Category Allocation

QIB Not less than 50.00% of the Net offer
NIB Not more than 15.00% of the Offer
Retail Not more than 35.00% of the Offer

Source: Company Reports

Objects of the Issue

• The company proposes to utilize the Net Proceeds from the Issue towards
augmenting the capital base of the company to fulfil its future capital
requirements, which are anticipated to arise as a result of the expansion of the
business and assets.

• Further, a portion of the proceeds from the Issue will be used towards meeting
Issue-related expenses.

4|Page (18th June 2024) For any further query, please email us on research@venturasecurities.com
 Financial summary

Y/E March (INR Lakhs) FY21 FY22 FY23 Y/E March (Rs Lakhs) FY21 FY22 FY23
Income Statement
Interest Income 8,416.9 6,486.9 6,311.0 Ratio Analysis
Interest Expense 4,808.0 3,500.0 2,765.0
Net Interest Income 3,608.9 2,986.9 3,546.0 Int Expended / Int Earned 57.1 54.0 43.8
YoY change (%) -15.7 -17.2 18.7 Int Income / Total Funds 18.5 17.3 16.2
Other income 264.0 262.0 644.0 NII / Total Income 41.6 44.3 51.0
Total Net Income 3,872.9 3,248.9 4,190.0 Other Inc. / Total Income 3.0 3.9 9.3
Total Operating Expenses 1,182.0 1,429.0 1,828.0 Ope. Exp. / Total Income 13.6 21.2 26.3
Pre Provision profit 2,690.9 1,819.9 2,362.0 Net Profit / Total Funds 3.6 1.1 4.0
YoY change (%) -5.6 -32.4 29.8 Credit / Deposit 40.0 33.5 33.8
Provisions 771.0 1,062.0 359.0 Investment / Deposit 0.0 0.0 0.0
Profit Before Tax 1,919.9 757.9 2,003.0 NIM % 7.9 7.2 9.3
YoY change (%) -60.5 164.3
Taxes 290.3 346.8 424.0 Solvency
Net profit 1,629.6 411.1 1,579.0 Gross NPA 1,504.0 1,722.0 1,619.0
YoY change (%) 317.5 -74.8 284.1 Net NPA 1,249.0 1,426.0 1,220.0
Gross NPA (%) 3.6 4.9 4.6
Balance Sheet Net NPA (%) 3.0 4.1 3.5
Cash and Bank 1,331.6 191.8 1,032.2
Advances 41,283.9 34,287.1 34,556.7 Per Share Data (`)
Investments 20.3 20.3 20.4 EPS 6.7 1.7 5.9
Other financial assets 1,994.0 2,157.9 1,365.7 BVPS 18.3 21.1 23.2
Net block 910.0 744.2 2,075.0
Total Assets 45,539.8 37,401.3 39,049.9 Valuation Ratio
Deposits 1,033.2 1,022.2 1,022.2 Adj P/E (x) 18.0 71.4 20.5
Other Borrowings 28,782.2 20,006.0 14,778.0 Adj P/BV (x) 6.6 5.7 5.2
Other liabilities 2,177.6 2,256.3 2,180.4
Networth 13,546.8 14,116.8 21,069.4 Return Ratio
Total liabilities 45,539.8 37,401.3 39,049.9 RoAA (%) 3.6 1.0 4.1
RoAE (%) 12.5 3.2 7.7
Dupont Analysis
% of Average Assets
Net Interest Income 7.9 7.2 9.3 Growth Ratio (%)
Other Income 0.6 0.6 1.7 Interest Income -26.8 -22.9 -2.7
Net Income 8.5 7.8 11.0 Interest Expenses -33.4 -27.2 -21.0
Operating Expenses 2.6 3.4 4.8 Total Income -34.0 -22.3 3.1
Operating Profit 5.9 4.4 6.2 Net profit 317.5 -74.8 284.1
Provisions 1.7 2.6 0.9 Net advances -52.5 -16.9 0.8
Taxes 0.6 0.8 1.1
ROAA 3.6 1.0 4.1

Source: Ventura Research

5|Page (18th June 2024) For any further query, please email us on research@venturasecurities.com
 Disclosures and Disclaimer

Ventura Securities Limited (VSL) is a SEBI registered intermediary offering broking, depository and portfolio management services to clients. VSL is member
of BSE, NSE and MCX-SX. VSL is a depository participant of NSDL. VSL states that no disciplinary action whatsoever has been taken by SEBI against it in last
five years except administrative warning issued in connection with technical and venial lapses observed while inspection of books of accounts and records.
Ventura Commodities Limited, Ventura Guaranty Limited, Ventura Insurance Brokers Limited and Ventura Allied Services Private Limited are associates of
VSL. Research Analyst (RA) involved in the preparation of this research report and VSL disclose that neither RA nor VSL nor its associates (i) have any financial
interest in the company which is the subject matter of this research report (ii) holds ownership of one percent or more in the securities of subject company
(iii) have any material conflict of interest at the time of publication of this research report (iv) have received any compensation from the subject company in
the past twelve months (v) have managed or co-managed public offering of securities for the subject company in past twelve months (vi) have received any
compensation for investment banking merchant banking or brokerage services from the subject company in the past twelve months (vii) have received any
compensation for product or services from the subject company in the past twelve months (viii) have received any compensation or other benefits from the
subject company or third party in connection with the research report. RA involved in the preparation of this research report discloses that he / she has not
served as an officer, director or employee of the subject company. RA involved in the preparation of this research report and VSL discloses that they have not
been engaged in the market making activity for the subject company. Our sales people, dealers, traders and other professionals may provide oral or written
market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein. We may have earlier issued
or may issue in future reports on the companies covered herein with recommendations/ information inconsistent or different those made in this report. In
reviewing this document, you should be aware that any or all of the foregoing, among other things, may give rise to or potential conflicts of interest. We may
rely on information barriers, such as "Chinese Walls" to control the flow of information contained in one or more areas within us, or other areas, units, groups
or affiliates of VSL. This report is for information purposes only and this document/material should not be construed as an offer to sell or the solicitation of
an offer to buy, purchase or subscribe to any securities, and neither this document nor anything contained herein shall form the basis of or be relied upon in
connection with any contract or commitment whatsoever. This document does not solicit any action based on the material contained herein. It is for the
general information of the clients / prospective clients of VSL. VSL will not treat recipients as clients by virtue of their receiving this report. It does not
constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of clients / prospective clients.
Similarly, this document does not have regard to the specific investment objectives, financial situation/circumstances and the particular needs of any specific
person who may receive this document. The securities discussed in this report may not be suitable for all investors. The appropriateness of a particular
investment or strategy will depend on an investor's individual circumstances and objectives. Persons who may receive this document should consider and
independently evaluate whether it is suitable for his/ her/their particular circumstances and, if necessary, seek professional/financial advice. And such person
shall be responsible for conducting his/her/their own investigation and analysis of the information contained or referred to in this document and of evaluating
the merits and risks involved in the securities forming the subject matter of this document. The projections and forecasts described in this report were based
upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. Projections and forecasts are
necessarily speculative in nature, and it can be expected that one or more of the estimates on which the projections and forecasts were based will not
materialize or will vary significantly from actual results, and such variances will likely increase over time. All projections and forecasts described in this report
have been prepared solely by the authors of this report independently of the Company. These projections and forecasts were not prepared with a view toward
compliance with published guidelines or generally accepted accounting principles. No independent accountants have expressed an opinion or any other
form of assurance on these projections or forecasts. You should not regard the inclusion of the projections and forecasts described herein as a representation
or warranty by VSL, its associates, the authors of this report or any other person that these projections or forecasts or their underlying assumptions will be
achieved. For these reasons, you should only consider the projections and forecasts described in this report after carefully evaluating all of the information
in this report, including the assumptions underlying such projections and forecasts. The price and value of the investments referred to in this
document/material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a
guide for future performance. Future returns are not guaranteed and a loss of original capital may occur. Actual results may differ materially from those set
forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. We do not provide tax advice to our
clients, and all investors are strongly advised to consult regarding any potential investment. VSL, the RA involved in the preparation of this research report
and its associates accept no liabilities for any loss or damage of any kind arising out of the use of this report. This report/document has been prepared by VSL,
based upon information available to the public and sources, believed to be reliable. No representation or warranty, express or implied is made that it is
accurate or complete. VSL has reviewed the report and, in so far as it includes current or historical information, it is believed to be reliable, although its
accuracy and completeness cannot be guaranteed. The opinions expressed in this document/material are subject to change without notice and have no
obligation to tell you when opinions or information in this report change. This report or recommendations or information contained herein do/does not
constitute or purport to constitute investment advice in publicly accessible media and should not be reproduced, transmitted or published by the recipient.
The report is for the use and consumption of the recipient only. This publication may not be distributed to the public used by the public media without the
express written consent of VSL. This report or any portion hereof may not be printed, sold or distributed without the written consent of VSL. This document
does not constitute an offer or invitation to subscribe for or purchase or deal in any securities and neither this document nor anything contained herein shall
form the basis of any contract or commitment whatsoever. This document is strictly confidential and is being furnished to you solely for your information,
may not be distributed to the press or other media and may not be reproduced or redistributed to any other person. The opinions and projections expressed
herein are entirely those of the author and are given as part of the normal research activity of VSL and are given as of this date and are subject to change
without notice. Any opinion estimate or projection herein constitutes a view as of the date of this report and there can be no assurance that future results or
events will be consistent with any such opinions, estimate or projection. This document has not been prepared by or in conjunction with or on behalf of or at
the instigation of, or by arrangement with the company or any of its directors or any other person. Information in this document must not be relied upon as
having been authorized or approved by the company or its directors or any other person. Any opinions and projections contained herein are entirely those of
the authors. None of the company or its directors or any other person accepts any liability whatsoever for any loss arising from any use of this document or
its contents or otherwise arising in connection therewith. The information contained herein is not intended for publication or distribution or circulation in
any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is prohibited unless otherwise expressly
authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and Derivatives Segments” as prescribed by Securities and
Exchange Board of India before investing in Securities Market.

Ventura Securities Limited - SEBI Registration No.: INH000001634

Corporate Office: I-Think Techno Campus, 8th Floor, ‘B’ Wing, Off Pokhran Road No 2, Eastern Express Highway, Thane (W) – 400608

6|Page (18th June 2024) For any further query, please email us on research@venturasecurities.com