Resourceful Automobile, a small company based in Delhi, recently launched a ₹12 crore IPO that received an overwhelming response, with bids totalling nearly ₹4,800 crore. This impressive demand means the IPO was oversubscribed 419 times.
Company Background
Founded in 2018, Resourceful Automobile operates under the brand name Sawhney Automobile and specialises in selling and servicing Yamaha motorcycles and scooters. Despite having only two outlets and a team of eight employees, the company’s IPO, open from August 22 to 26, attracted significant interest from investors.
IPO Subscription Details
On the first day, the IPO was subscribed 10.35 times, and by the second day, this had surged to 74.13 times. On the third day, data showed that investors had bid for 40.76 crore shares, while only 9.76 lakh shares were available, leading to the massive oversubscription. Retail investors showed the most enthusiasm, subscribing to the IPO 496.22 times, while non-institutional investors subscribed 315.61 times.
Expert Insights on SME IPO Frenzy
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that the demand for SME IPOs has become excessive. He mentioned that despite concerns about the quality of some offerings, the potential for quick gains has driven high investor interest, leading to significant stock price increases post-listing. However, he warned that this overexcitement might cool down as the stock market stabilises.
Regulatory Concerns and Warnings
Regulators, including SEBI, have raised concerns about the risks associated with investing in small and medium-sized enterprises (SMEs). SEBI officials have urged caution, particularly around potential price manipulation in SME listings and trading. In March, SEBI Chairperson Madhabi Puri Buch highlighted these risks and advised investors to be careful.
Planned Use of IPO Proceeds
Resourceful Automobile’s IPO involved offering 10.25 lakh equity shares at ₹117 each, amounting to an issue size of ₹11.99 crore. According to the draft prospectus, the company plans to use the funds to expand its operations by opening new showrooms in Delhi/NCR, repaying debt, and meeting other corporate needs.
Future Listing on BSE’s SME Platform
As of December 28, 2023, the company operates through two showrooms and employs eight people. The company’s shares will be listed on the BSE’s SME platform.
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