Popular Vehicles IPO: Peer comparison to management - 7 key things to know from RHP
- Popular Vehicles IPO price band is set at ₹280 to ₹295 per equity share. At the upper end of the price band, the company aims to raise ₹601.55 crore from the issue.
Popular Vehicles IPO: The initial public offering (IPO) of Popular Vehicles & Services Ltd is open for public subscription and has received a lukewarm response from investors so far on the second day.
The bidding for Popular Vehicles & Services IPO commenced on March 12 and will conclude on March 14, Thursday. The IPO allotment will be finalized on March 15. The equity shares of Popular Vehicles & Services are proposed for listing on BSE and NSE, with a listing date fixed on March 19.
Popular Vehicles & Services is in the business of automobile dealerships in India. The Popular Vehicles IPO price band is set at ₹280 to ₹295 per equity share. At the upper end of the price band, the company aims to raise ₹601.55 crore from the issue which comprises of a combination of fresh issue of 85 lakh equity shares aggregating to ₹250 crore and an offer for sale (OFS) of 1.19 crore shares aggregating to ₹351.55 crore.
ICICI Securities, Nuvama Wealth Management and Centrum Capital are the book running lead managers of the Popular Vehicles & Services IPO, while Link Intime India Private Ltd is the IPO registrar.
Before investing in the Popular Vehicles IPO, let us take a look at key things from the red-herring prospectus (RHP) of the company:
Popular Vehicles IPO: Key things to know from RHP
1] About Company Popular Vehicles & Services Ltd
Popular Vehicles and Services Ltd is a diversified automobile dealership company in India that has a fully integrated business model that caters to the complete life cycle of vehicle ownership. It categorizes its automobile dealership business into three key segments, namely, (a) passenger vehicles including luxury vehicles, (b) commercial vehicles, and (c) electric two-wheeler and three-wheeler vehicles.
Popular Vehicles & Services operates passenger vehicle dealerships of Maruti Suzuki, Honda, and JLR; Commercial vehicle dealerships of Tata Motors Commercial and “BharatBenz through its subsidiaries; and electric three-wheeler vehicle dealerships of Piaggio and Ather.
As of December 31, 2023, it operated through its network of 61 showrooms, 133 sales outlets and booking offices, 32 preowned vehicle showrooms and outlets, 139 authorized service centers, 43 retail outlets, and 24 warehouses located across 14 districts of Kerala, 8 districts in Karnataka, 12 districts in Tamil Nadu and 9 districts in Maharashtra.
2] Issue Objectives
According to the RHP, the company proposes to utilise the net proceeds from the fresh issue towards repayment and/or pre-payment, in full or part, of certain borrowings, availed by the company and certain of its subsidiaries, namely, PAWL, PMMIL, KGPL, KCPL and PMPL; and for General corporate purposes.
3] Promoters & Management
John Paul, Francis Paul and Naveen Philip are the promoters of Popular Vehicles & Services.
Jacob Kurian is the Chairman and Non-Executive Independent Director of the company, while Naveen Philip is the Managing Director of the company. Raj Narayan is the Chief Executive Officer and John Verghese is the Chief Financial Officer of the company.
4] Financials
The company's net profit witnessing a sharp increase from ₹32.45 crore in FY21 to ₹64.07 crore in FY23. Its revenue rose to ₹4,875.00 crore in FY23 from ₹2,893.52 crore in FY21.
For the period ending September 2023, the company’s net profit stood at ₹40.04 crore upon revenue of ₹2,834.99 crore.
5] Peer Comparison
Popular Vehicles & Services has named Landmark Cars as its listed peer. As of March 1, 2024, Landmark Cars traded at a P/E ratio of 34.84. As per the RHP, Popular Vehicles & Services’ earnings per share (EPS) stood at ₹10.22, while that of Landmark Cars stood at ₹22.56.
6] Risk Factors
Popular Vehicles & Services is subject to the significant influence of its OEMs. The company’s top two OEMs i.e., Maruti Suzuki and Tata Motors (commercial), account for more than 80% of the company’s consolidated revenue. Therefore, such significant influence of the OEMs and restrictions imposed by them pursuant to the terms of dealership agreements may adversely impact the business, results of operations, financial condition, and prospects, including its ability to expand into new territories and acquire additional dealerships.
A large portion of business operations, which is approximately 96.9% of the company’s consolidated revenue, are concentrated in the states of Kerala, Tamil Nadu, and Karnataka. Any adverse developments (including any natural calamities) in these states could have an adverse effect on the business, results of operations, and financial condition of the company.
An increase in competition among automotive dealerships through online and offline marketing reduces the profit margins on vehicle sales and related businesses of the industry, thereby affecting the growth of the company.
7] Competitive Strengths
Popular Vehicles & Services has a long-standing presence in the automobile industry and well-established relationships with leading OEMs. Penetration in markets in which it operates complemented by innovative marketing strategies. It has a fully integrated business model leading to business stability and higher margins.
The company has a consistent track record of profitable financial performance and increasing growth.
Popular Vehicles IPO Subscription Status
Popular Vehicles & Services IPO has been subscribed 42% so far on Wednesday, the second day of the bidding process. The public issue received bids for 60.80 lakh equity shares as against 1.44 crore shares on the offer, as per NSE data till 2:25 pm.
The IPO has been subscribed 0.73 times in the retail category and 0.17 times in the Non-Institutional Investors’ (NII) category so far. The Qualified Institutional Buyers (QIB) are yet to bid for the issue.
Popular Vehicles IPO GMP Today
Popular Vehicles IPO GMP today, or grey market premium today is ₹0, as per market observers. This indicates that Popular Vehicles shares are not commanding any premium in the grey market and are trading at par with their IPO price which is ₹295 per share in the grey market.
Popular Vehicles IPO Review
Popular Vehicles provides complete services throughout the life cycle of vehicle ownership, including sales of new and preowned vehicles, servicing, spare parts distribution, driving schools, and third-party financial and insurance product sales.
The company’s topline increased at a CAGR of 19% from FY 21. For FY23, the EBITA and PAT margins are to be 4.80% and 1.31%, respectively. For FY23, ROE and ROCE are 18.68% and 18.32%, respectively. The company’s P/E is valued at 28.86x for FY23. We recommend to subscribe for listing gains, said Canara Bank Securities.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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