These days companies have to raise funds through IPO. Resourceful Automobile, one of the companies wanting to raise funds, has received a tremendous response in its IPO. This is a response that even the company might not have expected. This response has surprised everyone. The company, which runs two Yamaha bike showrooms in New Delhi, was initially planning to raise Rs 11.99 crore through IPO. The IPO was subscribed more than 418 times and the company received applications worth more than Rs 4,760 crore.
The company received bids for 40.76 crore shares against the offer of 10.25 lakh shares. The company had fixed the share price at Rs 117 per share and the lot size at 1,200 shares per application. The IPO will be listed on the BSE SME platform on August 29.
only eight employees
Resourceful Automobile has only eight employees, of which three are in legal and finance, two in sales, two in operations and one in human resources. The company, which operates just two showrooms, has received mixed reactions on social media, with some talking about expected returns while others demanding strict regulations to protect the interests of retail investors. The company will use the funds raised to open new showrooms, repay loans and meet working capital requirements.
Analysts had advised to avoid IPO
Many analysts had advised users not to apply for the IPO, as the company operates in the highly competitive sector of two-wheeler dealership and its financial performance has also not been stable. For the year ending February 2024, the company reported a revenue of ₹17.23 crore with a profit of ₹1.52 crore. In March 2023, the company reported a revenue of ₹19.38 crore and a profit of just ₹41.5 lakh.
Why did the IPO get such a response?
Although its financials were not strong, one of the reasons for the strong subscription was the high expected returns. The company is currently enjoying a grey market premium of Rs 85 per share, which is about 73% of its share price.
NSE tightens rules for SME IPOs
NSE had tightened the rules for SME IPOs earlier this month. From September 2024, only those companies will be allowed to list in the SME segment that have had positive free cash flow to equity in at least two of the last three financial years.
