Popular Vehicles & Services IPO : 7 things to know
Popular Vehicles & Services Ltd, an automotive dealership company based out of the state of Kerala, had filed its draft red herring prospectus (DRHP) in August 2021 and SEBI had given its observations and approval for the IPO in October 2021.
Normally, the IPOs are approved by SEBI within a period of 2 to 3 months unless there are other queries or clarifications that the regulator has. The IPO of Popular Vehicles & Services Ltd will be a combination of a fresh issue and an offer for sale but despite getting the approval in October last year, the company is yet to announce the dates of its IPO.
7 important things to know about the Popular Vehicles & Services Ltd IPO
1) Popular Vehicles & Services Ltd has filed for an IPO with SEBI which comprises of a fresh issue of Rs.150 crore and an offer for sale of 42,66,666 (42.67 lakh) shares. Since the price band for the proposed Popular Vehicles & Services IPO has not yet been announced, the size of the fresh issue / IPO / offer for sale cannot be precisely determined.
However, the company has disclosed in the draft red herring prospectus that the fresh issue component would be to the tune of Rs.150 crore.
2) Let us talk about the offer for sale (OFS) portion of the IPO first. A total of 42.67 lakh shares approximately will be sold by early investors in the company as part of the offer for sale.
In the case of Popular Vehicles & Services Ltd, Banyan Tree Growth Capital II LLC will offload the entire OFS component of 42.67 lakh shares. Promoters will not be participating in the OFS. The OFS component will not result in any fresh fund infusion or dilution of the capital or the EPS.
However, the selling of stake by the early strategic investor will increase the free float of the company and facilitate listing of the stock.
3) The fresh issue portion of Rs.150 crore will be capital dilutive and also EPS dilutive for the company. The proceeds of the fresh issue will be largely allocated for repayment of certain borrowings and prepayment in some cases. This includes the working capital loans availed by Popular Vehicles & Services Ltd as well as its subsidiaries. Any surplus left after that would be assigned for general corporate purposes.
4) Popular Vehicles & Services Ltd, the Kerala-based company, is a leading diversified automotive dealership in the country. The company’s business model straddles the complete value chain and has presence across the automotive retail value chain.
The company is engaged in the sale of new passenger and commercial vehicles, services and repairs, distribution and servicing of spare parts, sale of pre-owned passenger vehicles or second-hand automobiles as well as the facilitation of the sale of third-party financial and insurance products.
While Popular Vehicles does not originate any loan or insurance products for the automobile sector, it has tie-ups in place for third party distribution.
5) Currently, Popular Vehicles & Services operates passenger vehicle dealerships on behalf of some of India’s biggest automobile names like Maruti Suzuki, Honda and JLR (Jaguar Land Rover) while it also has commercial vehicle dealership of Tata Motors.
Kerala has been a huge consume market for such lifestyle products and this company is perfectly poised to capitalize on this trend.
6) The equity shares of Popular Vehicles & Services will be listed on the BSE and also on the NSE. Offering a platform for automobile is nothing new. There are several online digital platforms already operating in India and some of them have even IPO plans.
CarTrade had a high profile public issue last year, but the stock has lost close to 70% from the IPO price and has joined the digital names to crash sharply.
India's Droom Technology, another such platform for buying and selling new and used vehicles, is planning a $400 million IPO in the Indian market. It is certainly becoming a crowded market but the fine tuning of digital expansion models will hold the key.
7) The IPO of Popular Vehicles & Services Ltd will be lead managed by Axis Capital, Centrum Capital and DAM Capital Advisors (formerly IDFC Securities). They will act as the book running lead managers or BRLMs to the issue.
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