Popular Vehicles IPO subscribed 19% on Day 1 so far; employee portion booked 3x

Popular Vehicles IPO subscribed 19% on Day 1 so far; employee portion booked 3x

The Kerala-based Popular Vehicles & Services is selling its shares in the price band of Rs 280-295 apiece. Investors can apply for a minimum of 50 shares and its multiples thereafter.

Incorporated in 1983, Popular Vehicles and Services is engaged in the business of automobile dealerships in India.
Pawan Kumar Nahar
  • Mar 12, 2024,
  • Updated Mar 12, 2024, 1:55 PM IST

The initial public offering (IPO) of Popular Vehicles & Services saw a muted response from the investors during the first day of the bidding process as the issue got fully subscribed. Bidding for the issue, which had kicked-off for bidding on Tuesday, March 12, was led by retail and employees of the company. The Kerala-based Popular Vehicles & Services is selling its shares in the price band of Rs 280-295apiece. Investors can apply for a minimum of 50 shares and its multiples thereafter. It is looking to raise Rs 601.66 crore via IPO, which includes a sale of fresh equity shares worth Rs 250, while an offer-for-sale (OFS) of up to 1,19,17,075 equity shares. According to the data, the investors made bids for 26,70,600 equity shares, or 19 per cent, compared to the 1,44,15,110 equity shares offered for the subscription by 1.40 pm on Tuesday, March 12. The three-day bidding for the issue will conclude on Thursday, March 14. The allocation for retail investors was subscribed 33 per cent, while the portion reserved for non-institutional investors saw a subscription of merely six per cent. Employees quota was booked 2.89 times. However, the quota set aside for qualified institutional bidders (QIBs) was yet to attract any bids as of the same time. Popular Vehicles and Services is engaged in the business of automobile dealerships in India. Incorporated in 1983, the company 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 grey market premium of Popular Vehicles & Services has remained stable as the company is commanding a premium of Rs 20-25 in the unofficial market, suggesting a listing pop of about 7-9 per cent for the investors. However, the premium in the grey market stood around Rs 33-35 earlier, when the issue was announced. Brokerage firms are positive on the issue citing its cheap valuations, long-standing presence in the auto industry, deep penetration, innovative market strategies, and high margin business. However, they see unpredictable factors denting the sale of vehicles, increasing demand of electric vehicles, OEM prices, operational inefficiency, stiff competition as the key risks for its business. Popular Vehicles & Services (PV&S) boasts a fully integrated business model and a proven track record of capitalizing on growth opportunities. The company's consistent profitability further underscores its financial strength, said Swastika Investmart in its IPO note. However, some key risks necessitate careful consideration such as reliance on OEMs, it said. "The Indian auto market is highly competitive, and unresolved customer complaints can negatively impact the brand's reputation. Despite these risks, the IPO valuation of 28.86 times 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 said. Ahead of its IPO, Popular Vehicles and Services raised Rs 180.17 crore from anchor investors as it allocated 61,07,325 shares at Rs 295 apiece. The company has reserved 50 per cent of the net offer for the qualified institutional investors (QIBs), while non-institutional investors (NIIs) will get 15 per cent of shares. Retail investors will get 35 per cent of the net offer. Considering the FY-23 EPS of Rs 9 on a post-issue basis, the company is going to list at a P/E of 32.78 times with a market cap of Rs 2,100.3 crore, whereas its peer namely Landmark Cars is trading at a P/E of 41.2 times, said Marwadi Financial Services IPO note. "We assign a 'subscribe' rating to this IPO as the company has a long-standing presence in the automobile industry and well-established relationships with leading OEMs along with consistent track record of profitable financial performance and growth. Also, it is available at a reasonable valuation as compared to its peers," it added. Nuvama Wealth Management, ICICI Securities, and Centrum Capital are the book running lead managers of the Popular Vehicles & Services IPO, while Link Intime India is the registrar for the issue. Shares of the company are likely to be listed on both BSE and NSE on Tuesday, March 19.  

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

 

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
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