Popular Vehicles & Services is set to hit the market with its initial public offering (IPO), open for bidding from March 12 to March 14. The automobile dealership company aims to raise Rs 601.55 crore through a combination of fresh equity shares and an offer-for-sale. Investors are contemplating whether to subscribe to the issue, considering factors such as the company’s financial performance, market presence, and potential risks. Here’s an in-depth analysis to help investors make an informed decision.
Issue Details and Price Band
The IPO comprises fresh equity shares worth Rs 250 crore and an offer-for-sale of up to 1,19,17,075 equity shares by BanyanTree Growth Capital LLC. Priced in the range of Rs 280-298 per share, the bidding can be done for a minimum of 50 equity shares and in multiples thereafter.
Financial Performance and Valuation
StoxBox notes that Popular Vehicles & Services exhibited strong financial performance, with Revenue, Ebitda, and PAT growing at CAGRs of 29.8%, 20.7%, and 40.6%, respectively, during the FY 2021-23 period. The issue is valued at a P/E of 28.9 times based on FY2023 earnings, which StoxBox considers fairly valued, recommending a ‘subscribe’ rating.
Ventura Securities also suggests subscribing, citing the company’s cheap valuations, long-standing presence in the automobile industry, innovative market strategies, and high-margin business with full integration.
Industry Outlook and Risks
The overall positive sentiment for automotive dealership businesses in India is driven by factors such as growth in new PV sales, rising average vehicle prices, increased financial penetration, and digital technology adoption.
However, Ventura Securities highlights unpredictable factors, increasing demand for electric vehicles, OEM prices, operational inefficiency, and a competitive landscape impacting margins as key risks for Popular Vehicles & Services.
Analyst Recommendations
StoxBox:
- Rating: Subscribe
- Valuation: P/E of 28.9 times based on FY2023 earnings
- Comment: Positive outlook on the automotive dealership business in India
Ventura Securities:
- Rating: Subscribe
- Comment: Positive on long-standing presence, market penetration, and high-margin business
Sushil Finance:
- Comment: Cautious approach, citing unpredictable factors denting vehicle sales
Financial Snapshot and Listing Date
For the six months ended on September 30, 2023, Popular Vehicles reported a net profit of Rs 40.04 crore with revenue of Rs 2,848.21 crore. The company is set to be listed on both BSE and NSE on Tuesday, March 19.
