IPO listed on 19 Mar'24
Popular Vehicles & Services Ltd
Minimum Investment
₹ 14,750 / 50 shares
Grey market premium
₹ 27 (9% premium)
Issue price
₹ 295
Listing price
₹ 289
Listing gains
-6 (-2%)
Listing on
Mar 19, 2024
Our Verdict:
Neutral
- Popular Vehicles & Services Ltd has shown steady growth over the last three years, backed by healthy return metrics. However, the electric vehicle (EV) sector only contributed about 2% to its overall revenue in the first half of FY24. Additionally, the firm’s debt-to-equity ratio is higher than that of its competitors.
- Also, more than 80% of the firm’s revenue comes from just two major Original Equipment Manufacturers (OEMs), presenting a considerable risk (as further detailed in the "Risk Factors" section).
- From a valuation standpoint, the IPO seems to be fully priced with a Price-to-Earnings (P/E) ratio of 29x based on FY23 earnings. Additionally, the grey market premium (GMP) predicts a subdued listing on the stock exchanges.
- Factors such as rising demand for EVs, operational challenges, and a competitive market could further impact the firm’s profit margins going forward. In light of these aspects, investors are recommended to keep an eye on the company’s performance in the ensuing quarters and consider waiting for more favourable entry points post listing.
About the company
Founded in
5 Jul'83
Managing director
Naveen Philip
- Popular Vehicles and Services Ltd (PVSL) is a comprehensive automobile dealership that offers a full spectrum of vehicle ownership services. This includes the sale of new vehicles, maintenance and repair services, distribution of spare parts and accessories, assistance with the purchase and exchange of pre-owned vehicles, and the provision of third-party financial and insurance products, along with driving school operations.
- The firm’s automobile dealership operations are divided into three main categories: (1) passenger vehicles, which encompass luxury cars, (2) commercial vehicles, and (3) electric two-wheelers and three-wheelers. As of December 31, 2023, it boasts a substantial presence with its network comprising 61 showrooms, 133 sales outlets and booking offices, 32 outlets for pre-owned vehicles, 139 authorized service centers, 43 retail outlets, and 24 warehouses. These facilities are strategically located across 14 districts in Kerala, eight districts in Karnataka, 12 districts in Tamil Nadu, and nine districts in Maharashtra.
STRENGTHS
- Impressive Financial Growth: PVSL has demonstrated consistent growth in its financial performance, with a Compound Annual Growth Rate (CAGR) of 30% in revenue from operations from FY21 to FY23. This growth period also featured a 16% increase in EBITDA and a substantial 41% rise in net profit.
- Strong Return Metrics: PVSL has experienced significant enhancements in return ratios, with its Return on Equity (RoE) increasing from 13.19% in FY21 to 18.68% in FY23, and further to 10.42% (not annualized) as of September 2023. Additionally, the Return on Capital Employed (RoCE) has grown from 17.09% in FY21 to 18.32% in FY23.
- Geographic Expansion: PVSL has aggressively expanded its footprint by adding 22 showrooms, 23 sales outlets and booking offices, and 47 service stations across its network from FY21 to FY23, extending its reach into new territories and states.
RISK FACTORS
- Heavy Reliance on Major OEMs: A significant portion of PVSL's revenue is generated from its association with two main OEMs: Maruti Suzuki and Tata Motors (commercial), which contribute to over 80% of its consolidated revenue. Any disruption, such as non-renewal, cancellation, or detrimental changes to dealership agreements by these OEMs, could significantly impact the company's operations.
- Inconsistency in Profit Margins: In FY23, PVSL experienced a minor decline in its operating margin, along with a slight decrease in its net profit margin in FY22. The margins remain modest, with an EBITDA margin of 4.8% and a net profit margin of 1.3% in FY23. The necessity for substantial capital expenditure to upgrade its showrooms, sales outlets, service centres, and other facilities to meet OEM requirements could further diminish the EBITDA margin.
- Cash Flow Concerns: During the first half of FY24, PVSL recorded negative cash flows from its operational activities. Continuation of such negative cash flows could pose a risk to the company's financial health and operational stability.
- Legal and Customer Service Risks: PVSL and its associated entities, including subsidiaries, promoters, and directors, are currently involved in various legal proceedings, some of which are criminal in nature. Unfavourable results from these legal matters could harm the company's reputation and operations. Additionally, with 76,607 customer complaints received in FY23, and 32,682 unresolved, the potential for future legal action against the company exists, which could further impact its business negatively.
- Regional Concentration: A large fraction of PVSL's earnings come from its operations in Kerala, Tamil Nadu, and Karnataka, accounting for roughly 97% of its consolidated revenue in the first half of FY24. Negative developments in these regions could adversely impact the company's performance.
Financials
All Values are in Cr.
Issue details
Issue type
Mainstream
Issue size
₹ 601.55 crore
Fresh Issue
₹ 250 crore
OFS
₹ 351.55 crore
Price range
₹ 280 - 295
Lot size
50 shares
Issue Objective
The net proceeds from the fresh issue are intended to be utilised towards:
- Repayment and/or pre-payment of certain borrowings availed by the company and its subsidiaries; and
- General corporate purposes.
Dates
Bidding open
12 Mar'24
Bidding close
14 Mar'24
Allotment date
15 Mar'24
Refund date
18 Mar'24
Listing
19 Mar'24
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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