 "IPO, Investment, Markets")
Popular Vehicles and Services made a weak stock market debut on Tuesday, with its shares getting listed at Rs 289.20, a 2 per cent discount to its issue price of Rs 295 per share on the National Stock Exchange (NSE). The stock of the auto dealer company listed at Rs 292 on the BSE.
Post listing, the stock price of Popular Vehicles slipped 8 per cent below its issue price to Rs 270 on the BSE. At 10:02 AM, it was trading at Rs 274.90, 6 per cent lower than its issue price. A combined nearly 850,000 equity shares have already changed hands on the NSE and BSE.
Popular Vehicles' IPO managed to receive subscription of 1.25 times. The portion for retail investors was subscribed 1.07 times, the portion for non-institutional investors (NII) was booked 67 per cent, and the portion for qualified institutional buyers (QIB) fetched a 1.92-times subscription. The employee portion was subscribed 8.04 times.
Popular Vehicles and Services is a diversified automobile dealership company in India that has a fully integrated business model, catering to the complete life cycle of vehicle ownership, right from the sale of new vehicles, servicing and repairing vehicles, distributing spare parts and accessories, to facilitating sale and exchange of pre-owned vehicles, operating driving schools and facilitating the sale of third-party financial and insurance products.
The company categorises 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.
Considering various demand drivers such as growth in new PV sales, rise in average vehicle prices, rising financial penetration and digital technology, analysts remain positive on the automotive dealership business in India.
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The company, however, 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 per cent of the company’s consolidated revenue.
"A large portion of business operations, which is approximately 96.9 per cent 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,@ the brokerage firm BP Equities said.
The company's consistent profitability further underscores its financial strength. However, some key risks necessitate careful consideration. Popular Vehicles' reliance on OEMs. Additionally, the Indian auto market is highly competitive, and unresolved customer complaints can negatively impact the brand's reputation, said those at Swastika Investmart.
Despite these risks, the IPO valuation of 28.86x P/E appears reasonable. Considering its strengths, growth potential, and moderate valuation, we recommend that investors consider applying for this IPO with a long-term perspective, it added.
