2 Yamaha showrooms, 8 employees, ₹2,700 crore in bids: Resourceful Automobile's SME IPO has internet amused

Resourceful Automobile's SME IPO set social media ablaze on Monday, sparking a wave of investor interest despite its modest scale. "Resourceful Automobile SME IPO is crazy. 2 Yamaha dealerships, 8 employees. Asked for ₹12 crore, got ₹2,700 crore. Is no one questioning the value of 2 showrooms and 8 employees?" wrote one user on X, summing up the frenzy.

By 7 pm, the IPO had nearly 400 times the shares on offer, with BSE data showing 40.76 crore bids against just 10.24 lakh available shares. The retail investor segment alone saw a 496x subscription, underscoring the unprecedented demand.

The IPO, launched on August 22, has been closely watched as Resourceful Automobile plans to list on the BSE SME platform on August 29. The allotment will be announced on August 27 by Cameo Corporate Services.

Despite its limited scale, Resourceful Automobile has generated significant attention. The company, trading as “Sawhney Automobiles,” focuses on selling and servicing Yamaha motorcycles and scooters from two New Delhi showrooms. According to its draft red herring prospectus (DRHP), the IPO proceeds will fund expansion, including opening two new showrooms in the Delhi-NCR region, repaying debt, and meeting working capital needs.

Resourceful Automobile reported a negative cash flow of ₹19.33 lakh from operations for the period ending October 31, 2023. The substantial oversubscription and high grey market premium, estimated up to 73%, have led some traders to warn against speculative investments.

Among cautionary voices was a trader, Mr. X, who wrote, “Avoiding #ResourcefulAutomobile IPO. Operates 2 Showrooms, sells Yamaha two-wheelers under the brand name Sawhney Automobile. Only has 8 employees. Current GMP at 73% (looks fabricated).”

Viral Nagda also expressed concerns, tweeting, “Indian Markets Hit Fever Pitch as Resourceful Automobile's IPO is Oversubscribed by 200x Despite Negative Cash Flow. #ResourcefulAutomobile sought ₹12 Cr, received ₹2400 Cr. Despite two years of negative cash flow, the grey market premium soars over 70%.”

Nagda’s observations highlight the discrepancy between the company's financial performance and the IPO’s soaring interest. The high liquidity and over-subscription leave market observers questioning whether the enthusiasm is backed by sound fundamentals or driven purely by speculation.