Aasaan Loans IPO Review: Akme Fintrade India Ltd (Aasaan Loans) is coming up with its Initial Public Offering. The IPO will open for subscription on June 19, 2024, and close on July 21, 2024. In this article, we will look at the Aasaan Loans IPO Review 2024 and analyze its strengths and weaknesses. Keep reading to find out! 

Aasaan Loans IPO Review – About The Company

Incorporated in 1996, Akme Fintrade India Ltd is a non-banking financial company (NBFC) with over 20 years of experience in lending to rural and semi-urban areas in India. Its portfolio includes Vehicle Finance and Business Finance Products designed for small business owners.

Operating in rural and semi-urban areas across Rajasthan, Maharashtra, Madhya Pradesh, and Gujarat, the company has its registered office in Udaipur, Rajasthan, and a Corporate Office in Mumbai, Maharashtra. With 12 branches and over 25 points of presence, including digital and physical branches, Akme Fintrade India Ltd has served over 200,000 customers.

The company specializes in financing the purchase of new two-wheelers and three-wheelers, such as scooters, motorcycles, and auto rickshaws, catering to both salaried professionals and self-employed non-professionals.

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Aasaan Loans IPO Review – Industry Overview

It is anticipated that the Assets Under Management of NBFCs will experience single-digit growth (around 7-8%) in the fiscal year 2024. This growth can be attributed to NBFCs’ ongoing focus on providing credit facilities to consumer segments with low bank penetration, as well as the sustained demand for credit from the retail sector.

The continual investment in technology infrastructure and improved internet accessibility is expected to drive the growth of NBFCs in the coming years. Additionally, there is expected to be a consistent demand in the retail sector, particularly for housing and vehicle loans, which will further propel the growth of the NBFC sector.

In the recent past, many NBFCs have improved in terms of liquidity, capital, and provisioning, enabling them to capitalize on growth opportunities amidst increasing economic activity. However, they will face competition from banks. 

The recent change in NPA recognition norms by RBI to a daily due-date basis instead of the month-end will have implications for asset quality, leading to an increase in GNPAs due to revised income recognition, asset classification, and provisioning norms. 

This will have a large accounting impact, as the improving economy is not expected to cause borrower credit profiles to deteriorate, and ultimate credit losses are not expected to change significantly.

Aasaan Loans IPO Review – Financials

If we look at the financials of Akme Fintrade India Ltd we can see that, the company had earned huge interest income in FY20 which has been followed by a decline in the following years.

The total interest income earned by the company has declined from Rs.84.16 crores to Rs.63.10 crores from FY21 to FY23. However, the rate of decline in the company’s PAT was much lower due to the company’s reduction in its finance cost. The company recorded to net profit of Rs.15.80 crores in FY23 as compared to a net profit of Rs. 16.30 in FY21.

For the nine months ended of FY24, the company has recorded a Total interest income of Rs.50.77 crores and a net profit of 12.24 crores. When it comes to the GNPA, the percentage has increased from 3.57% in FY21 to 3.94% in the nine months of FY24. This signifies that the defaults by the customers to the company have increased.

When it comes to return ratios, the company recorded an increase in the ROA which was reported at 4.05% as of FY23. On the other hand, the ROE of the company has declined from 12.52% in FY21 to 7.72% in FY23 signifying a low return to the capital invested by the shareholders.

The below image shows the key performance indicators of Akme Fintrade India Ltd:

 key performance indicators of Akme Fintrade
Source: RHP of the company

Key Players in the Market

The below image shows a comparison of Aasaan Loans with its listed industry peers:

Aasaan Loans with its listed industry peers
Source: RHP of the company

Strengths of the Company

  • The company has a long history of serving rural and semi-urban markets with high growth potential and has 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. 
  • The company has a strong, experienced and dedicated management team, including KMPs with significant industry experience which positions it to capitalize on future growth opportunities. 
  • The company mainly focuses on providing its products and services to customers from lower and middle-income group segments. This helps it gain a deep understanding of target customers and enables it to meet their financial requirements.
  • The company has adopted a diversified funding base which has minimised its costs of borrowings with prudent asset liability management and effective liquidity management. 
  • The company’s customer due diligence procedures encompass multiple levels of checks and controls designed to assess the quality of customers and to confirm that they meet the stringent selection criteria and include a comprehensive evaluation of repayment capacity and detailed cash flow analysis of the customer 

Weaknesses of the Company

  • The company’s business is concentrated in the State of Rajasthan and its result of operations may be adversely affected by difficulties in expanding the business or pursuing new business opportunities in new regions and markets.
  • The Company has higher levels of NPAs as compared to some of its peer companies and hence its business may be adversely affected if it is unable to provide for such higher levels of NPAs.
  • The Company has not complied with certain RBI norms/guidelines in the past. Any non-compliance with the RBI’s norms/guidelines and violations of regulations prescribed by the RBI could expose the company to certain penalties and restrictions.
  • The secretarial records for a previous securities allotment and certain forms could not be found in the company’s records or at the MCA Portal. This could lead to legal or regulatory actions against the company in the future.
  • The company’s credit ratings are presently low and any future downward revision in our credit ratings could adversely affect its ability to service its debts as well as raise funds in the future

Aasaan Loans IPO Review – GMP

The shares of Akme Fintrade India Ltd traded at a premium of 27.50% in the grey market on June 18, 2024. The shares tarded at Rs.153. This gives it a premium of Rs 33 per share over the cap price of Rs 120. 

Aasaan Loans IPO Review – Key IPO Information

ParticularsDetails
IPO Size₹132.00 Cr
Fresh Issue₹132.00 Cr
Offer for Sale (OFS)--
Opening date19 June 2024
Closing date21 June 2024
Face Value₹10 per share
Price Band₹114 to ₹120 per share
Lot Size125 shares
Minimum Lot Size1
Maximum Lot Size13 (1625 shares)
Listing Date26 June 2024

Promoters: Nirmal Kumar Jain, Manju Devi Jain, Dipesh Jain and Nirmal Kumar Jain HUF.

Book Running Lead Manager: Gretex Corporate Services Limited

Registrar to the Offer: Bigshare Services Private Limited

The Objective of the Issue

The NBFC intends to utilise the net proceeds of the IPO towards the following purposes:

  • To augment the company’s capital base to fulfil its future capital requirements, which are anticipated to arise as a result of the expansion of the business and assets.
  • A portion of the net proceeds will be utilized towards meeting the Issue related expenses
  • Furthermore, the company expects to receive the benefits of listing on the Stock Exchanges and enhancement of the Company’s brand name

Conclusion

In this article, we looked at the details of Aasaan Loans IPO Review 2024. While the company boasts a long-standing presence in the rural and semi-urban markets, a diversified funding base, and a strong management team, it also faces challenges such as higher levels of NPAs, past non-compliance with RBI norms, and low credit ratings

Are you applying for the IPO? Let us know in the comments below.

Written by Aaron Vas

By utilizing the stock screenerstock heatmapportfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investments.


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