[TusharK]

Resourceful Automobile, a Delhi-based 2-wheeler dealership, has received bids worth around Rs 4,800 crore for its Initial Public Offering (IPO). The Rs 12 crore IPO has been oversubscribed nearly 400 times.



The high subscription figures for a Small & Medium Enterprises (SME) IPO have baffled investors. This was despite the company reporting a negative cash flow of Rs 19.33 lakh for the period ending October 31, 2023.

Resourceful Automobile offered 10.2 lakh shares at a fixed price of Rs 117. The issue opened on August 22 and closed on August 26. According to reports, retail investors were the most active, with aggregate demand at 24.1 crore shares, while the total demand for high net-worth investors was nearly 150 times the total offer size.

As per reports, merchant banker Swastika Investmart had marketed the IPO like any other one that would be subscribed by “5-10-20” times. However, the high subscription numbers were beyond anyone’s expectations.

The company plans to use proceeds from the IPO to expand its operations and repay its debt. It currently operates two Yamaha showrooms in Delhi with a small workforce of just 8 employees.

Source: TOI

Link to Team-BHP news

[SmartCat]

SME IPO segment has been like this for a couple of years now:

[Tensor]

This over subscription looks similar to Mahindras booking on the first day

[Renaissance Man]

Some context provided on what it actually means in the below tweet.

https://x.com/deepakshenoy/status/1828299285168878021

[PioneerNB]

I think I can share a few observations from my gym and office coffee talks on this:
Most of the people don't care. IPO has become a lottery system most think they get some profit they will sell and bankroll. And it's mostly freshers, college goers with spare change who have become investors, no one reads on the company profile or researches on the firm itself IPO and headlining stocks have become a thing to bet on.

And honesty it's creating a fomo(fear of missing out). In gym when I hear such conversations i somehow later get my mobile and check on the share price, IPO bands etc. though i rarely invest i somehow think one IPO can get me an iPhone given the way people discuss those around but I may be wrong

[vinu_h]

Reflects the spare liquidity in the market and lack of research on the part of the investors. The 2nd part scares me more than the 1st.

[ajmat]

Originally Posted by vinu_h

Reflects the spare liquidity in the market and lack of research on the part of the investors. The 2nd part scares me more than the 1st.

One only needs to observe Ola Electric- faulty product, toxic management culture (from people I know who worked there), venturing into unrelated areas which require major investment (chip design), and IP theft allegations (mapmyindia).

[vinu_h]

Originally Posted by ajmat

One only needs to observe Ola Electric- faulty product, toxic management culture (from people I know who worked there), venturing into unrelated areas which require major investment (chip design), and IP theft allegations (mapmyindia).

The investors went ahead and invested despite knowing what you just said. I believe the drop in Ola's stock is temporary and there is a lot of room for growth. This makes for a good read and also backs my comment. Tesla stock was flat for a decade from IPO and hit 300x after. Those with an appetite for risk made their fortune from it and Ola is no different.

[ajmat]

Originally Posted by vinu_h

The investors went ahead and invested despite knowing what you just said. I believe the drop in Ola's stock is temporary and there is a lot of room for growth. This makes for a good read and also backs my comment. Tesla stock was flat for a decade from IPO and hit 300x after. Those with an appetite for risk made their fortune from it and Ola is no different.

I do dispute that unless Ola professionalizes. Do remember, Tesla created its own technology and disrupted with original design and concept. The article you sent is good - note these companies are focused and established.

An interesting comment from a VC who spoke to us.

"During the gold rush, most money was made by the people supplying the tools!"

[SmartCat]

Those interested in 2 wheeler dealership business should look at numbers of this company.

When they had one dealership, their revenues were Rs. 8 cr per year. And opening the 2nd dealership resulted in revenues doubling to Rs. 16 cr. Profits are around Rs. 60L per year per dealership. However, it is quite possible that these small companies inflate expenses to avoid tax.

Bike inventories are around Rs. 2 cr per dealership on an average. Isn't this a bit excessive? How much does a typical Yamaha bike or scooter sell for? Rs. 1.3 Lakhs?

[Karthik.guru]

This entire ordeal reminds me of the PP Waterballs IPO from one of Jaspal Bhatti's sketch!

https://www.youtube.com/watch?v=z0vDYs7OEew

[sf71hvettel]

Originally Posted by SmartCat

Those interested in 2 wheeler dealership business should look at numbers of this company.

When they had one dealership, their revenues were Rs. 8 cr per year. And opening the 2nd dealership resulted in revenues doubling to Rs. 16 cr. Profits are around Rs. 60L per year per dealership. However, it is quite possible that these small companies inflate expenses to avoid tax.

Bike inventories are around Rs. 2 cr per dealership on an average. Isn't this a bit excessive? How much does a typical Yamaha bike or scooter sell for? Rs. 1.3 Lakhs?

Inventory of Rs. 2 Crs with a turnover of Rs. 16 Cr is around 45 days stock. It is in line with the standard for dealerships.

The rest of the IPO and the valuation- not in line any standards whatsoever.

[condor]

They wanted 12 Cr. Got 4800 Cr. Even at 3% P.A. interest, it's 144 Cr. If they hold the collected amount for just 1 month while they process the applications, they will still get 12 Cr in interest in just 1 month.

If this isnt crazy, then what is ?

(Note: assuming the applications were fully paid-up)

[Prashant_BHP]

Todays equity segment is not driven by rationale and fundamentals - it has become highly speculative and driven by few operators who start the music. God help folks who are left with that particular stock when the music stops (and it always does - especially for businesses without strong value proposition and a strong moat).

[SmartCat]

Originally Posted by sf71hvettel

Inventory of Rs. 2 Crs with a turnover of Rs. 16 Cr is around 45 days stock. It is in line with the standard for dealerships.

I meant per dealership. They have inventory of Rs. 4 cr or 5 cr right now. So this is 90 day inventory.

Originally Posted by condor

They wanted 12 Cr. Got 4800 Cr. Even at 3% P.A. interest, it's 144 Cr. If they hold the collected amount for just 1 month while they process the applications, they will still get 12 Cr in interest in just 1 month. If this isnt crazy, then what is ?

They collected just Rs. 12 cr. It's just that the issue was 400x 'oversubscribed' & total bid value was Rs. 4,800 cr.
https://www.5paisa.com/stock-market-...ription-in-ipo

Such an investor interest implies that any random shop can collect crores from the public via an IPO. Even Gada Electronics: