Small Bike Showroom’s ₹12 Crore IPO Gets a Massive ₹4,700 Crore in Investor Bids

A bike showroom company based in New Delhi, Resourceful Automobile, has grabbed attention on Dalal Street with its initial public offering (IPO). The company, which operates two Yamaha showrooms, launched a ₹12-crore SME IPO that received a whopping ₹4,700 crore in bids from investors.

Despite having only eight employees—three in finance and legal, two in sales and marketing, one in HR, and two in operations—the company’s IPO saw huge demand. Classified as a Small and Medium Enterprises (SME) IPO, the issue was nearly 400 times oversubscribed on its last day of bidding, Monday. The IPO opened on August 22 and is set to list on the BSE SME platform on August 29.

Investors bid for 40.76 crore shares against an offer of just 10.25 lakh shares. The IPO was entirely a fresh issue of 10.24 lakh shares, priced at ₹117 each, with a minimum bid of 1,200 shares per lot. The overwhelming response has sparked discussions on social media about the excitement in the SME IPO market and calls for stricter regulations.

According to the company’s red herring prospectus (RHP), Resourceful Automobile plans to use the funds from the IPO to expand its operations by opening two more showrooms in the Delhi-NCR area, repaying debt, and meeting working capital needs. The company deals in buying and selling various vehicles, including motorcycles, cars, and scooters.

For the year ending February 2024, Resourceful Automobile reported total revenues of ₹16.53 crore and a net profit of ₹1.52 crore. However, it also had a negative cash flow of ₹19.33 lakh from operating activities for the period ending October 31, 2023.

Last week, the National Stock Exchange announced stricter rules for SME IPOs due to the surge in interest. Starting September, only companies with positive free cash flow to equity in at least two of the last three financial years will be allowed to list in the SME segment.