Popular Vehicles IPO sails through on day 3 so far, QIB and retail portion fully booked

The initial public offering (IPO) of Popular Vehicles & Services managed to sail through on the third and last day of the bidding process. However, the bidding remained dull for the issue. The issue was subscribed only 27 per cent on day one and ended day two with about 46 per cent subscription.

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. 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 1,46,19,950 equity shares, or 1.01 times, compared to the 1,44,15,110 equity shares offered for the subscription by 15.15 pm on Thursday, March 14. Bidding for the issue began on Tuesday, March 12 and will conclude today, that is, Thursday, March 14.

The allocation for retail investors was subscribed 99 per cent, while the portion reserved for qualifed institutional investors saw a subscription of 1.30 times. Employees quota was booked over 7.33 times. However, the portion set aside for non-institutional bidders attracted bids for only 62 per cent, 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 5-7 in the unofficial market, suggesting a flat listing for the investors. However, the premium in the grey market stood around Rs 25-30 earlier on the first day of the bidding.

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.

A day before 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.

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 the risks, the valuation of 28.86 times P/E appears reasonable. Considering the strengths, growth potential, and moderate valuation, we recommend that investors consider applying for this IPO with a long-term perspective," it said.

Nuvama Wealth Management, Centrum Capital and ICICI Securities 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.
 

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