Popular Vehicles IPO Review: Popular Vehicles & Services is coming up with its IPO issue of Rs. 601.55 Cr which will open on 12th March 2024. The issue will close on 14th March and be listed on the exchange on 19th March 2024. This article will analyze the strengths and weaknesses of the Popular Vehicles & Services Limited IPO Review 2024. Keep reading to find out!

Popular Vehicles IPO Review – About the Company

Popular Vehicles is a diversified automotive dealership that operates on a fully integrated business model. They offer products & services for a complete life cycle of vehicle ownership, which includes the sale of new vehicles, services, and distribution of spare parts.

Apart from being an automotive dealer in brand new cars, popular vehicles also run their pre-owned car business, operate driving schools, and sell third-party financial products like Insurance.

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The key business of Popular Vehicles operates on three segments

  1. Passenger Vehicle: Under this business, the Company operates dealerships for Maruti Suzuki, Jaguar Land Rover, and Honda Cars.
  2. Commercial Vehicle: In the Commercial Vehicle segment, popular operates dealerships of Tata Motors and Daimler India (BharatBenz). 
  3. Electric Vehicle: The Company operates Ather Energy’s dealership for 2-wheelers and Piaggio’s dealership for selling electric three-wheeler vehicles

As of December 31, 2023, the Company operated a network of 61 showrooms, 133 sales outlets, and 32 pre-owned vehicle showrooms. In Addition, Popular vehicle operates 139  authorized service stations, 43 retail outlets, and 24 warehouses across Kerala, Karnataka, Tamil Nadu, and Maharashtra.

New Vehicle dealership is the largest segment for Popular by revenue having sold around 47,820 cars as of FY23 and 23,993 in the first half of FY24. The Company earns 68% of its revenue from this segment, which scaled revenue by 43%. 

The fastest growing segment happens to be the spare part, which scaled up by 46% and now contributes to 14% of the Company’s revenue. Pre-owned Vehicles are the third largest segment (7.6%), and Services are the fourth largest (6%).

Popular Vehicles IPO Review – About the Industry

The auto industry is a key contributor to the Indian economy, which currently represents 7.1% of GDP. The industry employs over 1.9 Cr people directly and indirectly, according to the Ministry of Information and Broadcasting report, 2023.  

India is one of the largest auto markets in the world, with annual domestic sales of over 2 Cr. Domestic sales reached a high of 2.7 Cr in FY19, backed by favorable macroeconomic growth, rising consumption, favorable rural demand, as well as healthy demand from end-use sectors. 

However, domestic sales fell 17.7% in FY19 amid a slowdown in GDP growth as well as inventory correction for Bharat Stage-VI (BS-VI) upgradation. The COVID-19 pandemic also hit the automotive industry hard, and sales dropped 12% on an already low base of fiscal 2020 to 1.9Cr in FY21.

The domestic auto industry is dominated by 2-wheelers, which constitute more than 70% of the industry. However, after the pandemic sales of Personal Vehicles, Commercial Vehicles, and three-wheelers have recovered a lot faster than two-wheelers. 

A few key trends that are shaping the automotive industry are premiumization, with car buyers looking to spend more for premium cars or premium features and there is increased focus on safety going forward. There is also a transition towards the use of CNG as well as Electric vehicles, which are made lucrative via FAME subsidies by the government.

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Popular Vehicles IPO Review – Financials

In FY23, Popular Vehicles & Services reported a revenue of Rs. 4,875 Cr which increased by 46% from Rs. 3465 Cr in FY22. The revenue growth came as a result of strong growth in the New Vehicles and spare parts segment which collectively contributed to 82% of revenue. Since FY21, revenue from operations has grown at the rate of 31% CAGR.

Being a dealer of vehicles, Companies like Popular are extremely squeezed off on margins. The cost of goods sold is nearly 85%-86% of revenue. Due to its EBITDA margins was around 4.8% in FY23, which dropped from 5.13% in FY22. The Company is barely profitable with net profit margins of 1.31% in FY23, which have increased from 0.97% in FY22

Due to a 34-basis point increase in Net Profit Margins, the Company saw Net Profits grow by 90% from Rs. 34 Cr in FY22 to Rs. 64 Cr in FY23. Since FY21 these Profits have increased at the rate of 40.5% CAGR.

The Company has a debt-to-equity ratio of 1.47x. The high debt comes as a result of exposure to long-term lease liabilities as well as short-term borrowings, which serve as working capital for the dealerships. 

Popular Vehicles & Services IPO Review – Financials
Source: RHP of the Company

Popular Vehicles IPO Review – Key Players 

The market for dealership stocks on the Indian exchange is very new. Hence, we have just one Company, Landmark Cars Ltd. The peer is a dealer for Mercedes Benz, Honda, Jeep, Volkswagen, and Renault for passenger Vehicles, and Ashok Leyland for Commercial Vehicles.

In terms of revenue, Popular Vehicles is a larger business and marginally overtakes Landmark cars in terms of return on Net worth. The Company listed on December 22 at a discount of 5% over the lower end of its IPO price. However, since then the stock has rallied to give a return of 15%.

As of March 1st, 2024, the Company traded at a Price-to-Earnings of 35x. Popular Vehicles at the higher end of the price band of Rs. 295, the Company with an EPS of Rs. 10.22 will be valued at a PE of 28.86x.

Popular Vehicles & Services - Key Players 
Source: RHP of the Company


  1. Long-Standing Presence in the Automobile Industry: The Kuttukaran Group (parent of Popular Vehicles) has been in the automobile industry since 1953. They first set up a Maruti Suzuki dealership in 1984 and since then ventured into partnering with various OEMs to set up and operate dealerships of their brand.
  2. Deep penetration in the semi-urban & rural Market: The Company has a deep understanding of the towns & villages of India. It has pioneered the hub & spoke model, wherein its showrooms in the city serve as the hub and sale outlets and booking offices are located deep in the villages & town. These spoke source the vehicles for the underpenetrated markets of the country.
  3. Fully Integrated Business model: The Company does not just operate a couple of dealerships but it has ventured into offering end-to-end services of vehicle ownership. This makes the best use of the brand to bring in recurring revenue as the customer requires maintenance of the vehicle.
  4. Proven track record in inorganic growth: As part of diversifying the business, the Company ventured into the spare parts business by acquiring a spare parts distributor in Karnataka. This form of inorganic growth led to the spare part business becoming a key revenue segment for the company generating 14% of the revenue.
  5. Consistent track record of financial performance: The Company has been consistently scaling its revenue via organic or inorganic growth. From what started as just a dealer of Maruti Suzuki, has now ventured into multiple other car brands which have boosted revenue.


  1. Cyclical nature of the Automotive Industry: The automotive industry runs very cyclically and the cycle is very sensitive to economic changes such as fuel prices, credit availability, interest rate, and level of discretionary spending. Due to this, stable revenue growth is not possible if the economy is on a down cycle. 
  2. Significant influence from OEMs: Brands like Tata Motors, Maruti Suzuki, and Jaguar Land Rover have significant influence over what inventory to maintain or what model of cars to have on display. Apart from this, the Company is not entitled to any exclusive right in any given geographical area.  
  3. Possibility of termination of dealership Agreements: Popular Vehicles operates by entering into dealership agreements with OEMs to sell their vehicles. However, not being in accordance with the agreements can lead to the termination of the license to sell which can have a significant impact on the Company’s revenue.
  4. Negative Operating Cash Flow: As of Six months ended in September 2023, the Company reported a negative cash flow of Rs. 161 Cr. This was due to a sudden rise in Inventories & trade receivables of Rs. 240 Cr & Rs. 76 Cr respectively. 
  5. Geographical Concentration Risk: Based out of Kochi, Kerala 71% of the Company’s revenue comes from the state of Kerala and 99% of FY23’s revenue came from Kerala, Karnataka, and Tamil Nadu. 

Popular Vehicles IPO Review – GMP

As of the date of writing this article, the Grey Market Premium for the shares of Popular Vehicles & Services Ltd has not yet been published. We will update the article with the respective expected as soon as its GMP is updated.

Popular Vehicles IPO Review – Key IPO Information

IPO SizeRs. 601.55 Cr
Fresh IssueRs. 250 Cr
Offer for Sale (OFS) Rs. 351.55 Cr
Opening date12 March 2024
Closing date14 March 2024
Face ValueRs. 2
Price BandRs. 280 - 295
Lot Size50 Shares
Minimum Lot Size1 Lot (50 Shares)
Maximum Lot Size13 Lots (650 Shares)
Min. InvestmentRs. 14,750
Listing Date19 March 2024

Promoters: John K. Paul, Francis K. Paul and Naveen Philip 

Book Running Lead Manager: ICICI Securities Ltd, Nuvama Wealth Management Ltd and Centrum Capital Ltd 

Registrar to the Offer: Link Intime Pvt Ltd

The Objective Of The Issue

  1. Rs. 192 Cr will be utilized towards repayment of borrowings availed by the Company or its subsidiaries.
  2. The remaining amount will be utilized for General Corporate purposes.


Popular Vehicles & Services Ltd is a leading multi-brand automobile dealership company with a strong foothold in the relatively underpenetrated semi-urban and rural markets of South India. The company’s long-standing presence, regional penetration, and proven track record of inorganic growth are some of the greatest positives about the Company.

However, the cyclical nature of the automotive industry and the dependence on the OEM brand to have a strong reputation for the dealership to sell is a challenging part. Apart from this, cash flows for the first half of FY24 were negative as a result of a pile-up of inventory. These are some of the risks associated with the business.

Nevertheless, the automotive industry had been quite the star performer in FY23 and is currently having a successful FY24. Hence, do you think it’s valued to apply for the Company at an earnings premium of 29x? Let us know in the comments below..

Written by Nasir Hussain

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