Vedant Asset coming with an IPO to raise Rs 3 crore

Vedant Asset

• Vedant Asset is coming out with an initial public offering (IPO) of 7,50,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 40 per equity share.
• The issue will open on September 30, 2022 and will close on October 04, 2022.
• The shares will be listed on SME Platform of BSE.
• The share is priced 4 times higher to its face value of Rs 10.
• Book running lead managers to the issue is Hem Securities.
• Compliance Officer for the issue is Shobhan Gupta.

Profile of the company

The company is engaged in the business as a Corporate Business Correspondents (BC) of Bank of India, Jharkhand Rajya Gramin Bank (JRGB) and Madhya Pradesh Gramin Bank (MPGB) and as Mutual Funds Distribution through a partner base of more than 350 Vedant Mitra partners working in various rural and semi-urban locations and handling more than 100 crores of assets under its Mutual fund distribution business. The company’s Vedant Mitra Kendra acts as Banking - Customer services Point (CSPs) to fulfil all the necessary banking requirements of the people, Adhaar enabled payment system, Direct Money Transfer (DMT), investment in Mutual Funds - mPOS, PAN related services, Insurance services, Loan services and recharge services along with Air, rail and Bus ticketing etc. The company is also looking towards expanding its services in the field of disbursing Government DBT subsidies, Adhaar linked subsidies and providing essential services through its network of Vedant Mitra Kendra.

The company has been promoted by Lallit Tripathi and Priyanka Maheshwari who have an overall experience of around 25 years and 18 years respectively in the field of providing financial services, mutual fund distribution and financial distribution services. Under the leadership of its promoters and the guidance of its management it has carved itself as a complete financial solution provider for urban and rural markets and it is continually expanding its reach and market. Over the year, the company’s success has been recognized by many institutes like CNBC Hall of Fame Award for the year 2019, CNBC TV18 Best financial advisors award for East 2016, CNBC TV 18 Best financial advisor (IFA Up country East) 2017, One of the largest mobilization of AUM (Asset under management in Jharkhand), Wealth Forum Award for Highest Business Mobilization in Rest of East in 2015 etc.

Proceed is being used for:

• Financing the expenditure for business expansion.
• Meeting working capital requirements.
• General corporate purpose.
• Meeting issue expenses.

Industry Overview

Mutual fund (MF) industry in India is maturing with broad-basing of investors and increasing geographical spread. MFs in India have become major players in the equity and corporate bond markets and are also providing crucial liquidity support to the money market. Consequently, their influence on price movements in equity and debt markets as also domestic liquidity conditions has increased over time. While the penetration of the MF industry in India, as measured by the Assets under Management (AUM)/GDP ratio, is still low compared with the global average, favourable demographics, a history of high savings propensity and regulatory reforms brighten the outlook for the industry. Indian Mutual Fund Industry’s Average Assets Under Management (AAUM) stood at Rs 37.77 lakh crore (Rs 37.77 Trillion) AAUM of Indian Mutual Fund Industry for the month of July 2022 stood at Rs 37,76,911 crore.

The Reserve Bank of India has taken several initiatives over the years for increasing banking outreach and ensuring greater financial inclusion. A significant step in this direction was the issue of RBI guidelines in January 2006 for engagement of Business Correspondents (BCs) by banks for providing banking and financial services. Since then, the regulatory framework for the BC model has been progressively honed to ensure that consumer protection is not compromised while facilitating enhanced outreach of banking services. Business Correspondents are retail agents engaged by banks for providing banking services at locations other than a bank branch/ATM. Banks are required to take full responsibility for the acts of omission and commission of the BCs that they engage and have, therefore, to ensure thorough due diligence and additional safeguards for minimizing the agency risk. Basically, BCs enable a bank to expand its outreach and offer limited range of banking services at low cost, as setting up a brick and mortar branch may not be viable in all cases. BCs, thus, are an integral part of a business strategy for achieving greater financial inclusion.

Encouraging competition among banks in under-banked rural areas and providing more products and services through the BC channel will help both to deepen financial inclusion and to support sustainable BC operations (Uzma and Pratihari 2019). For example, while some banks allow customers to open small-value recurring or fixed deposits electronically at the BC point, in most cases, the physical paper trail still needs to supplement this action. Banks also restrict the encashment and closure of such deposits for credit into the customers’ savings accounts (of small denominations) digitally through the BC channel. This inhibits the mobilization of savings in rural areas, especially among women. While institutional directions to improve the range of microbanking products and services for delivery through the BC channel could encourage customers to move beyond cash-in-cash-out services, a larger service offering would also improve the earnings stream for BC agents via increased commission.

Pros and strengths

Strong product tie ups and multi-product support: Over the years the company has created strong relationships and tie-ups with different partners in the Banking and other sectors which help it to carter the different financial needs of the people in the region. In the Banking sector it is working with Jharkhand Rajya Gramin Bank (JRGB) as corporate BC since 20th, Aug, 2019, Bank of India Ranchi Zone since October 12, 2020 and Bank of India Indore zone since January 20, 2021 and recently it has also entered into agreement with Madhya Pradesh Gramin Bank (MPGB). Apart from the same have also entered into tie up agreements as Mutual fund distributers and Travel partners for providing the related services in the region. It is currently acting as brokers/distributers with 22 different Mutual funds and managing an AUM over 100 crores. These tie ups and support from different Banks and Mutual fund agencies have enabled the company to expand its business operation.

Single point solution: The company’s Vedant Mitra Kendra offers many services and act as a single point solution to many financial needs of the people. The customers can visit the Vedant Mitra Kendra to solve the problems related to banking needs by acting as CSP to fulfil all the necessary banking requirements of the people, Adhaar enabled payment system, Direct Money Transfer (DMT), investment in Mutual Funds - mPOS, PAN related services, Insurance services, Loan services and recharge services along with Air, rail and Bus ticketing. By providing multiple services at one place and at reasonable charges has enabled it to emerge as a single point solution for the different financial needs of the customers.

Technology & Integration Expertise: The company makes the best endeavour to provide the updated technology and best integration with the Banking servers and partner systems. It has created seamless connectivity Broadband Internet. For security purpose made User Policy in which authentication is required for each and every user of the server for secured and safe transactions. It has maintained Technology platform integrated with various banks & interoperable banking access, Biometric authentication enabling quick KYC and paper less banking, Integration with all partner systems across E Commerce, E-Governance, Insurance and Logistics. Further, it provides technical support resources trained to handle day-to-day IT glitches and troubleshooting for seamless transaction.

Risks and concerns

Limited operating history of mATM business: The company was incorporated in 2015 and has been engaged in the business as Banking - Customer services Point (CSPs) to fulfil all the necessary banking requirements of the people, Adhaar enabled payment system, Direct Money Transfer (DMT), investment in Mutual Funds - mPOS, PAN related services, Insurance services, Loan services and recharge services along with Air, rail and Bus ticketing etc. In the year 2022, with an available business opportunity, the company ventured into the business of setting up of mATM. The company has proposed to expand its business by setting up and operation of the mATM and POS. Further, it also intends to open 10 new branches and around 400 Business Correspondent across the central India. However, the Promoters of the company have very limited prior experience in this business. Due to limited operating history of the company and limited experience of existing promoters in mATM, it may face new business and financial challenges which may adversely affect the profitability and results of operations.

Significantly dependent on retail and rural customers: The company offers banking products and services to retail and rural customers. Its Vedant Mitra Kendra acts as Banking - Customer services Point (CSPs) to fulfil all the necessary banking requirements of the people, Adhaar enabled payment system, Direct Money Transfer (DMT), investment in Mutual Funds - mPOS, PAN related services, Insurance services, Loan services and recharge services along with Air, rail and Bus ticketing etc. For providing these services it has entered into agreements with Bank of India, Jharkhand Rajya Gramin Bank (JRGB) and Madhya Pradesh Gramin Bank (MPGB). Further, the company has also registered the company with AMFI and Mutual fund AMC for the mutual fund distribution business. Accordingly, a reduction in or failure to grow its retail and rural customer base could lead to losses and adversely affect its business and results of operations. Additionally, any decline in business, or in demand for its services could adversely affect its business, results of operations, financial condition and cash flows.

Total dependency on relationship with Banks and Mutual fund AMCs: The company is engaged in the business as a Corporate Business Correspondents (BC) of Bank of India, Jharkhand Rajya Gramin Bank (JRGB) and Madhya Pradesh Gramin Bank (MPGB) and as Mutual Funds Distribution through a partner base. For providing these services it has entered into agreements with Bank of India, Jharkhand Rajya Gramin Bank (JRGB) and Madhya Pradesh Gramin Bank (MPGB). Further, it has also registered its company with AMFI and Mutual fund AMC for the mutual fund distribution business. Based in these agreements its Vedant Mitra Kendra acts as Banking - Customer services Point (CSPs) to fulfil all the necessary banking requirements of the people, provide Adhaar enabled payment system, Direct Money Transfer (DMT), investment in Mutual Funds - mPOS & Loan services, any termination of these existing relationship would adversely affect its business, results of operations, financial condition and prospects.

Outlook

Vedant Asset is engaged in the business as a Corporate Business Correspondents (BC) of Bank of India, Jharkhand Rajya Gramin Bank (JRGB) and Madhya Pradesh Gramin Bank (MPGB) and as Mutual Funds Distribution through a partner base of more than 350 Vedant Mitra partners working in various rural and semi-urban locations and handling more than 100 crores of assets under its Mutual fund distribution business. On the concern side, the company’s business is wholly depended on its relationship with Banks and Mutual fund AMCs. It has entered into agreements with Banks and registered with Mutual fund AMCs, any termination of these existing relationship would adversely affect its business, results of operations, financial condition and prospects.

The company is coming out with an IPO of 7,50,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 40 per equity share to mobilize Rs 3 crore. On performance front, total income of the company for FY22 stood at Rs 167.23 lakh whereas in FY21 the same stood at Rs 113.47 lakh representing an increase of 47.38%. The main reason of increase was increase in the business operations of the company. The company reported Restated profit after tax for the financial year 2021-22 of Rs 13.81 lakh in comparison to Rs 8.68 lakh in the financial year 2020-21. Over a period of 7 years the company has developed a partner base of more than 350 Vedant Mitra partners working in various rural and semi-urban location and handling more than 100 crores of asset under its Mutual fund distribution business. Jharkhand and the nearby region itself has a huge potential of expansion of its Vedant Mitra kendra considering the rural, semiurban and urban areas. Thus, it strives to increase its base and network of Mitra Kendra in Rural, Urban and semi urban area where the market for financial services and other auxiliary services have a great potential.