Popular Vehicles shares list at discount; fall 11% post debut

Shares of Popular Vehicles and Services made a weak debut on the domestic stock exchanges on Tuesday, tracking bearish trends in the broader market. The share price of the Kerala-based automobile dealer listed at ₹289.20 on the NSE, down 1.96% against the initial public offering (IPO) price of ₹295 per share. On the BSE, the stock kicked off trading at ₹292, down 1% against the issue price.

Post listing, Popular Vehicles shares declined as much as 11% to hit a low of ₹262.4 on the NSE, while it slipped to ₹262.9 levels on the BSE.  The market capitalisation dipped to ₹1,917 crore.

The weak listing of Popular Vehicles was in line with Street expectations as the stock was trading flat in the grey market, indicating a subdued debut on the exchanges. The IPO was commanding a grey market premium (GMP) of ₹33 on March 7, which dropped drastically in the last 12 days.

“Allottees who applied for the public offering for listing premium are advised to maintain their stop loss at ₹250 and wait for further upside, whereas those who have a medium- to long-term perspective can also hold the stock,” says Shivani Nyati, Head of Wealth, Swastika Investmart Ltd.

Nyati further said that the company's consistent profitability further underscores its financial strength. “However, some key risks necessitate careful consideration such as its reliance on OEMs (original equipment manufacturer). Additionally, the Indian auto market is highly competitive, and unresolved customer complaints can negatively impact the brand's reputation. Despite these risks, the IPO valuation of 28.86x P/E appears reasonable,” Nyati adds.

The ₹601.55 crore IPO of Popular Vehicles & Services, which was a combination of a fresh issue of ₹250 crore and an offer for sale (OFS) of shares worth ₹351.55 by the existing shareholder, received muted response from investors as the issue was subscribed 1.25 times. The public issue received 1.07 times bids in the retail category, 1.92 times in qualified institutional buyers, and 0.67 times in the non-institutional investors segment, which opened for bidding between March 12-14.

The price band for the public issue was fixed at ₹280 to ₹295 per share, and the minimum lot size for an application was 50 shares and in multiple thereafter. The issue included a reservation of up to 37,453 shares for employees offered at a discount of ₹28 to the issue price.

Out of ₹250 crore raised from issuance of fresh equities, the company intends to use ₹192 crore for repayment and pre-payment, in full or part, of certain borrowings, availed by the company and its subsidiaries, namely, PAWL, PMMIL, KGPL, KCPL and PMPL. The balance amount will be used to meet general corporate purposes. 

Established in 1983, Popular Vehicles and Services is engaged in the business of automobile dealerships in India, selling passenger vehicles, commercial vehicles, as well as electric two-wheeler and three-wheeler vehicles. 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.

Most of the IPOs, that made their debut this month, saw negative listings on exchanges amid corrections in the broader market. Last week, Gopal Snacks, JG Chemicals, and R K Swamy joined the stock market, with all three making their debut at a discount.

While Gopal Snacks listed at a 12.46% discount over the IPO price on March 14, JG Chemicals debuted 5.4% lower against the issue price on March 13. In a similar trend, R K Swamy, which debuted on March 12, was listed at a 13.2% discount over the IPO price.   

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