Popular Vehicles and Services has opened its Initial Public Offering (IPO) for subscription on March 12. However, the response on the first day has been lukewarm, with a 27% subscription rate. The retail investors segment showed a 47% subscription rate, while the Non-Institutional Investors (NII) portion reached 11%. The Qualified Institutional Buyers (QIB) portion remains unbooked, and the employee segment has been oversubscribed by 3.83 times.
Investors have until Thursday, March 14, to subscribe to the Popular Vehicles and Services IPO, priced between ₹280 to ₹295 per share. The company secured ₹180.17 crore from anchor investors on March 11, and the lot size comprises 50 equity shares, available in multiples of 50 thereafter.
Here are 10 key risks associated with the Popular Vehicles and Services IPO:
- The automotive industry is sensitive to economic changes, and a decline in vehicle demand may impact business.
- The company is influenced and restricted by Original Equipment Manufacturers (OEMs) through dealership agreements, affecting business operations.
- Non-renewal, termination, or adverse modifications to dealership agreements with OEMs can negatively impact business prospects.
- The majority of business operations are concentrated in Kerala, Tamil Nadu, and Karnataka, making the company vulnerable to adverse developments in these states.
- A significant portion of revenue comes from dealerships of Maruti and Tata Motors (Commercial), and any adverse developments in these OEMs could affect business.
- Increasing competition among automotive dealerships, both online and offline, reduces profit margins on vehicle sales.
- Success depends on the value, perception, marketing, and competitiveness of the brand and OEMs, and any damage or failure to compete effectively could affect business.
- Vehicle sales are impacted by OEMs’ incentive programs, and any adverse impact on sales directly affects profit margins.
- Margins earned from services, repairs, spare parts, and accessories may be impacted by pricing guidelines set by OEMs.
- The company may fail to successfully implement its growth strategy, including acquiring dealerships, diversifying the portfolio, and expanding into existing locations, affecting financial condition and results.
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