Why Akara NCD Might Be Your Next Smart Investment
Understanding Akara NCD
Non-Convertible Debentures (NCD) from Akara Capital Advisors represent a fixed-income investment opportunity offering 14% annual returns. Investors receive monthly payments of ₹1,167 per ₹1 lakh invested, providing regular income streams uncommon in traditional debt instruments.
The investment involves lending capital to Akara Capital Advisors Private Limited, an RBI-registered Non-Banking Financial Company established in 2016. The company operates in the digital lending space, serving over 2.8 million customers across India.
Company Profile: Akara Capital Advisors
Akara Capital Advisors has established itself as a technology-driven NBFC specializing in small-ticket personal loans. The company leverages advanced data analytics for underwriting decisions and partners with fintech platform Stashfin to provide 24/7 customer service.
Key Business Metrics (FY2024)
- Assets Under Management: ₹1,767 crores
- Annual Profit: ₹69 crores
- Customer Base: 2.8 million borrowers
- Average Loan Size: ₹53,000
- Geographic Presence: Pan-India digital operations
Financial Health Indicators
The company maintains strong financial ratios relative to industry standards:
- Gross NPA: 4.98% (vs industry average of 6-8%)
- Net NPA: 2.27% (indicating good recovery rates)
- Capital Adequacy Ratio: 31.65% (significantly above RBI minimum of 15%)
- Debt-to-Equity Ratio: 1.58x (within acceptable limits)
- Interest Coverage Ratio: 1.67x (adequate coverage)
Investor Backing
Akara Capital has secured investment from reputable global investors:
- Tencent Group – Chinese technology conglomerate
- Fasanara Capital – European investment management firm
- Altara Ventures – Growth capital specialist
- Uncorrelated Ventures – Alternative investment fund
This investor profile indicates institutional confidence in the company’s business model and growth prospects.
Investment Structure and Returns
Return Profile
Akara NCD provides 14% annual return distributed through monthly payments. This structure offers several advantages over traditional fixed deposits:
Monthly Income Calculation:
- ₹1 lakh investment → ₹1,167 monthly income
- ₹5 lakh investment → ₹5,833 monthly income
- ₹10 lakh investment → ₹11,667 monthly income
Investment Parameters
- Minimum Investment: ₹1,00,000
- Tenure Options: 12 to 36 months
- Payment Frequency: Monthly
- Interest Rate: 14% per annum
- Tax Treatment: Interest taxable as per applicable income tax slab
Risk Assessment
Positive Risk Factors
Regulatory Oversight: RBI registration ensures compliance with banking regulations and periodic supervision.
Asset Security: NCDs are typically secured against the company’s loan portfolio, providing collateral backing.
Diversified Portfolio: With 2.8 million customers and small average loan sizes, the risk is distributed across a large borrower base.
Strong Capitalization: The 31.65% capital adequacy ratio provides substantial buffer against potential losses.
Risk Considerations
Scale Limitations: Akara Capital operates at a relatively smaller scale compared to established NBFCs, which may impact fund-raising capabilities during growth phases.
Profitability Sustainability: While currently profitable, the company’s earnings consistency over economic cycles remains to be established.
Credit Risk: As with all corporate debt instruments, there exists risk of default, though this is mitigated by asset backing and regulatory oversight.
Liquidity Risk: Early redemption may involve penalties or may not be available depending on terms.
Overall Risk Rating
Based on financial metrics, regulatory status, and investor backing, Akara NCDs present a moderate-low risk profile. The investment carries higher risk than bank deposits but lower risk than equity instruments.
Comparative Analysis
Akara NCDs vs Traditional Options
| Investment Type | Annual Return | Monthly Income | Risk Level | Liquidity |
|---|---|---|---|---|
| Akara NCDs | 14% | Available | Moderate-Low | Lock-in period |
| Bank Fixed Deposits | 6.5% | Usually not available | Very Low | Premature penalty |
| Corporate Fixed Deposits | 8-9% | Limited availability | Low-Moderate | Restricted |
| Debt Mutual Funds | 7-10% | Not guaranteed | Moderate | High |
The comparison demonstrates Akara NCDs’ competitive positioning in the fixed-income space, offering higher returns than traditional debt instruments while maintaining reasonable risk levels.
Suitability Analysis
Suitable Investor Profiles
Income-Seeking Investors: Those requiring regular monthly income streams will find the monthly payout structure attractive.
Conservative Investors: Investors comfortable with moderate risk for enhanced returns compared to bank deposits.
Portfolio Diversifiers: Investors seeking to add fixed-income instruments beyond traditional bank products.
Medium-term Investors: Those with investment horizons of 1-3 years who can commit funds for the tenure.
Less Suitable For
Risk-Averse Investors: Those requiring capital protection guarantees similar to bank deposits.
Short-term Investors: Investors needing immediate liquidity or uncertain about fund requirements.
High-Risk Seekers: Investors comfortable with equity market volatility seeking higher returns.
Technology and Business Model
Akara Capital’s partnership with Stashfin enables 24/7 digital lending services, distinguishing it from traditional NBFCs. The company employs data analytics for:
- Credit Assessment: Advanced algorithms for borrower evaluation
- Risk Management: Real-time portfolio monitoring
- Customer Service: Automated and personalized borrower interactions
- Operational Efficiency: Reduced processing times and costs
This technology-first approach supports the company’s ability to maintain competitive margins while serving a large customer base efficiently.
Market Position and Growth Prospects
The company operates in India’s growing digital lending market, addressing credit needs of underserved segments. Key growth drivers include:
- Digital Adoption: Increasing smartphone penetration and digital payment acceptance
- Credit Gap: Significant unmet demand for small-ticket personal loans
- Regulatory Support: RBI’s supportive stance toward digital lending innovations
- Investor Confidence: Continued backing from global investors
Conclusion
Akara NCDs present a structured investment opportunity for investors seeking regular income with returns significantly higher than traditional fixed deposits. The combination of RBI regulation, asset backing, and institutional investor support provides reasonable security for the return profile offered.
The monthly income feature addresses a specific market need for regular cash flows, making these NCDs particularly suitable for income-focused investment strategies. However, investors must acknowledge the moderate risk involved and ensure alignment with their risk tolerance and investment objectives.
The investment merits consideration as part of a diversified portfolio, particularly for investors comfortable with corporate debt instruments and seeking alternatives to traditional bank products.
Investment Recommendation: Suitable for conservative to moderate investors seeking regular income with enhanced returns, provided they understand and accept the associated credit risks.
Important Disclaimer: This analysis is for informational purposes only and does not constitute investment advice. Prospective investors should conduct their own due diligence and consult with financial advisors before making investment decisions. Past performance does not guarantee future results, and all investments carry inherent risks.
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