Popular Vehicles & Services IPO Opens: A Comprehensive Look at India’s Leading Auto Dealership Company

The initial public offering (IPO) of Popular Vehicles & Services, a leading automobile dealership player in India, kicked off for subscription on Tuesday, March 12, 2024. However, the response from investors has been relatively lukewarm so far, with the issue being subscribed only 27% on the first day of bidding, according to data from the Bombay Stock Exchange (BSE).

A Closer Look at the IPO

The IPO comprises a fresh issue of shares worth Rs 250 crore and an offer for sale (OFS) of up to 1.19 crore equity shares by the existing shareholder, BanyanTree Growth Capital II, LLC. The price band for the issue has been set at Rs 280 to Rs 295 per share, with a minimum bid lot of 50 shares.

The company has reserved not more than 50% of the shares for qualified institutional buyers (QIBs), not less than 15% for non-institutional investors (NIIs) and not less than 35% for retail investors. Also, there is a reservation of equity shares worth Rs 1 crore for eligible employees at a discount of Rs 28 per share.

Subscription Status and Grey Market Premium

While the overall subscription status stood at 27% on the first day, the retail portion was subscribed 47%, and the NII portion was booked at 11%. However, the QIB portion remained unsubscribed. Interestingly, the employee portion was subscribed 3.83 times.

In the grey market, Popular Vehicles & Services shares were trading at a premium of Rs 5, indicating a potential listing price of Rs 300 per share, approximately 1.69% higher than the upper end of the IPO price band.

Company Overview and Financial Performance

Popular Vehicles & Services is a prominent player in the Indian automobile dealership sector, offering a comprehensive array of vehicle-related services throughout the ownership lifecycle. Their services encompass new and pre-owned vehicle sales, maintenance and repair, spare parts distribution, driving training, and facilitation of third-party financial and insurance products.

The company boasts an extensive network spanning 59 showrooms, 126 sales outlets and booking offices, 31 pre-owned vehicle facilities, 134 authorized service centers, 40 retail outlets, and 24 warehouses. Their footprint extends across 14 districts in Kerala, 8 in Karnataka, 12 in Tamil Nadu, and 7 in Maharashtra.

During the fiscal year 2023, Popular Vehicles & Services reported a net profit of Rs 64.07 crore, with revenue from operations standing at Rs 4,892.63 crore. In the first half of the current fiscal year, ending September 30, 2023, the company recorded a net profit of Rs 40.04 crore on revenue of Rs 2,848.21 crore, showcasing its consistent financial performance.

Brokerage Recommendations

Several brokerages have expressed positive views on the Popular Vehicles & Services IPO, citing the company's established track record, long-standing presence in the automotive industry, well-established relationships with top original equipment manufacturers (OEMs), market penetration and fully integrated business model.

Swastika Investmart Ltd, while acknowledging risks such as dependency on OEMs and intense competition, recommended subscribing to the IPO from a long-term perspective, considering the company's strengths, growth potential and moderate valuation.

Also, Hensex Securities Ltd advised subscribing to the issue for long-term investment, highlighting the company's profitable financial performance, steady growth and ability to recognize and seize both organic and inorganic growth opportunities.

Outlook and Listing

The allotment for the Popular Vehicles & Services IPO is scheduled for March 15, 2024, and the shares are expected to be listed on both the BSE and the National Stock Exchange (NSE) on March 19, 2024. While the initial response has been sluggish, market analysts and brokerages remain optimistic about the company's prospects, given its strong fundamentals and growth potential in the Indian automotive dealership market.