Popular Vehicles & Services Ltd, one of the largest automobile dealership houses, that hit the capital market with its ₹601 crore IPO in March 2024, has said it expects the revenue share of the Kerala market to come down to sub-50 per cent levels over the next 2-3 years, from 60 per cent now as a result of network expansion in other states through organic and inorganic ways.

The Kochi-headquartered company, one of the first set of dealers that were appointed by Maruti in 1984, has grown at a CAGR of about 25 per cent during FY21 and FY24 and reported a total revenue of ₹5647 crore in FY24.

Founded by K P Paul, the company operates as a multi-brand automobile dealership in Tamil Nadu, Karnataka, Kerala, and more recently, Maharashtra. As of March 31, 2024, its extensive network included 8 Nexa, 9 Arena and 3 commercial vehicle showrooms for Maruti Suzuki, 8 Honda showrooms, 2 JLR showrooms, 13 Tata commercial vehicle showrooms, 8 Daimler (BharatBenz) showrooms, 6 Piaggio and 3 Ather dealerships. It had 32 pre-owned vehicle showrooms and outlets, 142 authorized service centres, 44 retail outlets, and 24 warehouses.  

In total, it had more than 400 outlets across 4 States.

Although Kerala has been its primary market, the company has successfully reduced its revenue share to 60 per cent in FY24, from 74 per cent in FY21, supported by network expansion in other states as part of its risk diversification strategy.

“We further expect to bring this to sub-50 per cent levels over the next two years. This is on the back of adding new touch points in non-Kerala markets,” said Naveen Philip, Managing Director, Popular Vehicles & Services Ltd during the company’s latest earnings call.

Philip stated that the company is exploring both organic and inorganic growth opportunities. Inorganic growth involves acquiring businesses from other dealers with OEM consent, while organic growth focuses on opening new showrooms and outlets in new states and locations.

The company operates in four business segments: sale of new vehicles, service and repairs, distribution of spares, and exchange/sale of pre-owned vehicles. In FY24, new vehicle sales accounted for 74 per cent of revenue and 38 per cent of EBITDA, while the service and spares segment contributed 20 per cent of revenue and 56 per cent of EBITDA.

The company’s revenue growth will likely be in double digits in FY25, driven by the underlying growth of the auto industry, network expansion, and better realization. The expansion will continue with the addition of three sales and 16 service outlets in FY25, while the focus on service outlet expansion is expected to support profitability. Realizations are anticipated to rise due to an increasing mix of premium and luxury vehicles, according to a report by Nuvama Wealth Management.

The raised ₹602 crore, with primary funding of ₹250 crore, of which ₹192 crore was allocated towards debt reduction, leading to anticipated interest cost savings from FY25.

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