Are you looking to ride the wave of India’s booming automobile industry? Popular Vehicles’ upcoming IPO might just be the ticket you’ve been waiting for. In Popular Vehicles IPO analysis, we delve into the company’s rich history, industry outlook, financial performance, and more to help you make an informed investment decision.
Table of Contents
Popular Vehicles IPO Analysis: A Legacy of Innovation and Expansion
The visionary Mr. K.P. Paul started his career by establishing Popular Washing Home in the year 1939. Over the years, the founder diversified into tire, tube vulcanizing, and battery restoration services, seizing emerging opportunities in the automotive sector.
When the Second World War came to an end, he found a great opportunity in the spare parts business by procuring the surplus spare parts of military vehicles. In 1944, Popular Automobiles became one of India’s leading chain stores for spare parts, set in motion by Mr. Paul’s bold vision. Today, Popular Vehicles boasts a pan-Indian presence, with offices in Bangalore, Chennai, Mumbai, and Calcutta, offering a diverse portfolio encompassing passenger vehicles, commercial vehicles, and electric two-wheeler and three-wheeler vehicles.
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Popular Vehicles IPO Review: Industry Outlook
The automobile industry in India has seen massive growth in recent years and it makes a significant contribution to the country’s GDP. In India, annual domestic sales crossed 2 crore vehicles, which made India one of the largest auto markets in the world. Maruti Suzuki is the biggest passenger vehicle automaker in India, followed by Hyundai, Tata Motors, and Mahindra, collectively covering about 80% of the market share.
However, there is significant scope for dealerships and aftermarket services, as there are very few large players operating across the country. Dealerships are critical for the automobile industry as they serve as intermediaries between customers and manufacturers. They provide different services, such as vehicle sales, maintenance, repair, and customization.
The key growth drivers of the industry consist of rising disposable income, muted inflation, investments in infrastructure, new model launches, and competitive interest rates.
Popular Vehicles IPO Analysis: Business Operations
Popular Vehicles is a one-stop solution for all things related to automotive, from selling new vehicles to servicing, repairing, and distributing spare parts. Besides these, the company operates driving schools and also facilitates the sale of third-party financial and insurance products.
Popular Vehicles operates diversified automobile dealerships, including passenger vehicles from market leaders like Maruti, Honda, and Jaguar Land Rover, as well as Tata Motors and BharatBenz in the commercial vehicles category while in the electric vehicles segment, they have the dealerships of Ather and Piaggio Vehicles.
The company operates through its network of 61 showrooms, 139 authorized service centers, and 133 sales outlets in the states of Kerala, Karnataka, Tamil Nadu, and Maharashtra.
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Popular Vehicles IPO Analysis: Issue Objectives
Popular Vehicles IPO comprises both fresh issue and OFS. The main object of the fresh issue is to utilize INR 192 crore of net proceeds to repay or prepay of certain borrowings availed by the company and its subsidiaries to reduce the cost of interest, subsequently improving the company’s profitability.
Besides this, the company will also get the benefits of public listing such as increasing the company’s reputation and easier fund-raising for further expansion. However, the company will not receive any proceeds from the offer for sale.
Popular Vehicles IPO Analysis: Financial Performance
In terms of financial performance, the company has shown significant growth over the years. From 2021 to 2023, total revenue increased from INR 2893 crore to INR 4875 crore, with a CAGR of 18.99%. Net profit increased from INR 32.46 crore to INR 64.07 crore, with a CAGR of 25.43% over the same period. Net margins have also improved to 1.31% from 1.21% over the period mentioned.
These improvements in the numbers were fueled by increasing sales of Nexa and electric vehicles, which shows the company’s ability to respond according to market dynamics.
| FY 2021 | FY 2022 | FY 2023 | |
| Revenue | 2893 | 3465 | 4875 |
| Net Income | 32.46 | 33.67 | 64.07 |
| Margin (%) | 1.21 | 0.97 | 1.31 |
Popular Vehicles IPO: Company Strengths
Strong presence and relationships in the automobile industry: The company boasts partnerships with leading industry players like Maruti, Honda, and Tata Motors. They are also expanding their operations to emerging markets like electric vehicles, which shows the company’s flexibility and forward-thinking ability.
Fully integrated business model: The company caters to different needs of customers, from selling new vehicles to pre-owned vehicles, from servicing to repairing and selling insurance products, they cover it all.
Experienced management team: Popular Vehicles has an experienced and visionary management team led by Director John K. Paul, who has 49 years of experience in the automobile industry, along with managing director Naveen Philip, who has 26 years of industry experience. The company benefits from the wealth of experience and knowledge at its helm.
Popular Vehicles IPO Review: Risks
Popular Vehicles stand tall in the automotive industry, but not without challenges and uncertainties, Below are the key challenges that require investors’ discretion.
Geographical Concentration: A significant portion of the company’s consolidated revenue (approximately 97%) comes from the states of Kerala, Karnataka, and Tamilnadu, which exposes the company to localized economic fluctuations and regulatory changes.
Industry-related risks: The company faces industry-related risks like high competition, economic cycles, changing consumer behavior, and higher taxes, which might affect the company’s profitability.
Popular Vehicles IPO Analysis: Valuation
Popular Vehicles is exhibiting strong growth in net profit, EPS, and the number of new and pre-owned vehicle sales, along with spare parts and insurance product sales.
In comparison with its listed peer Landmark Cars, Popular Vehicles surpasses it in various aspects, including vehicle sales, servicing, and spare parts. Although Popular Vehicles operates on lower margins, resulting in lower EBITDA and EPS, its margins are improving. Besides this, Landmark Cars also has a higher net asset value per share than Popular Vehicles.
As of March 1, 2024, Landmark Cars’ shares are trading at a PE of 34.84, while Popular Vehicles’ PE is 28.85 based on its maximum issue price and 2023 EPS. Taking these factors into consideration, the valuation of Popular Vehicles seems reasonable.
| KPIs (2023) | Popular Vehicles | Landmark Cars |
| Number of new vehicles sold | 47,820 | 21,310 |
| Number of vehicles serviced | 9,57,148 | 3,17,954 |
| Revenue (INR crore) | 4,875 | 3,382 |
| EPS | 10.22 | 22.56 |
| ROCE % | 18.32 | 20.38 |
The company has shown impressive financial growth in recent years with a fair valuation, and they have established long-term dealership relationships with industry leaders such as Maruti, Honda, and Tata Motors. They are also expanding their operations into new territories like Maharashtra and into emerging markets like electric vehicles, which have a promising future in India.
Additionally, the company provides integrated services covering the complete lifecycle of vehicle ownership. There is optimism in the markets about this upcoming IPO, which can also be witnessed in the gray market premium although it has lately come down following RBI’s clampdown on IPO funding.
