Landmarks Cars makes weak debut; stock lists 7% below issue price

Post listing, the stock extended decline and slipped 12 per cent below its issue price to Rs 446.45

Landmarks Cars made a weak stock market debut on Friday with its shares being listed at Rs 471 on the National Stock Exchange (NSE), a discount of 7 per cent below its issue price of Rs 506. The stock of the auto dealer opened at Rs 471.30 on the BSE.

Post listing, the stock slipped 12 per cent below its issue price to Rs 446.45. At the time of writing this report, it was trading at Rs 455.65, down 10 per cent against the offer price on the BSE. In comparison, the S&P BSE Sensex was down 0.84 per cent at 60,314.

Landmark Cars is a leading premium automotive retail business in India with dealerships for Mercedes-Benz, Honda, Jeep, Volkswagen and Renault. Landmark Cars also has a commercial vehicle dealership for Ashok Leyland in India. It has a presence across the automotive retail value chain, including sales.

The Rs 552 crore IPO of the automobile dealership chain was subscribed up to 3.1 times with keen interest from institutional investors. The objectives for the fresh issue are pre-payment of Rs 120 crore borrowings availed by subsidiaries and remaining amount is proposed to be used for general corporate purposes.

Landmark Cars is a leading automotive dealership for major OEMs with strong focus on high growth segments (premium & luxury). The growing presence in after-sales segment is leading to predictable growth in revenues and superior margins.  Inclusive business model capturing entire customer value chain and robust business - leveraging upon innovation and digitization are key triggers and highlights of the company.

"A large portion of Landmark Cars' business operations are concentrated in Gujarat and Maharashtra. The margins earned from services and repair vertical may be impacted by pricing guidelines set by Landmark Cars OEM suppliers. The increasing competition from automotive dealers, unauthorised service centres may have an adverse impact on its business. The company’s PV & commercial vehicle sales are subject to seasonality are key risk & concerns," analysts at ICICI Securities said in a note.

Based on FY22 earnings, the company is valued at 30.3x P/E, 12.7x EV/EBITDA and 0.7x EV/Sales. Over the next couple of years, the premium market segment is expected to grow at a CAGR of 10-12 per cent while luxury vehicle segment is also expected to grow at a CAGR of 14-16 per cent. Landmark is likely to report healthy numbers over the next couple of years led by strong growth in premium car segment, said Reliance Securities in an IPO note.