Resourceful Automobile IPO: A Surprising Surge in Subscription
Overview:

Resourceful Automobile, a company with just two Yamaha showrooms and a small workforce of eight employees, has captured significant attention in the market with its recent IPO. Despite its modest operations, the IPO saw an extraordinary subscription rate and a high grey market premium, raising questions and intrigue among investors and market watchers.

IPO Details:

Opening Date: august 22, 2024
Closing Date: august 26, 2024
Issue Size: Approximately ₹12 crore
Share Price: ₹117 per share
Shares Offered: 10.24 lakh shares
Lot Size: 1,200 shares per lot
Subscription and GMP:

Subscription Rate: 400 times on the final day of bidding
Grey Market Premium (GMP): Approximately 70% above the issue price
Company Profile:

Business: Operates two Yamaha showrooms under the brand name "Sawhney Automobiles" in New Delhi.
Employees: 8
Current Operations: Limited to the two showrooms
Usage of IPO Proceeds:

The proceeds from the IPO are intended to be utilized for:

Expanding operations by opening two new showrooms in the Delhi-NCR region
Repaying existing debt
Meeting working capital requirements
Market Reaction:

Social media Buzz: The IPO became a trending topic on social media platform X  with investors expressing disbelief and curiosity over the high subscription figures.
Traders' Opinions: Some traders and investors have expressed skepticism about the valuation and the high GMP. Concerns were raised about the company's limited operational scale relative to the high level of interest and the substantial subscription numbers.
Financials and Concerns:

Negative Cash Flow: For the period ending october 31, 2023, the company reported a negative cash flow of ₹19.33 lakh from its operating activities.
Market Cap vs. Net Worth: The IPO valued the company at a market cap of approximately ₹31 crore against a reported net worth of around ₹1.5 crore, raising questions about the valuation.
Allotment and Next Steps:

Allotment Date: Shares of Resourceful Automobile were allotted to successful bidders on august 27, 2024.
Official Registrar: Cameo corporate Services
Investor Takeaways:

Due Diligence: Potential investors should exercise caution and conduct thorough due diligence given the discrepancy between the company's modest operational scale and the high subscription rate.
Monitor Updates: Keeping an eye on official updates and the company's performance post-listing will be crucial to understand the IPO’s impact and long-term value.
The unusual high demand and valuation for Resourceful Automobile's IPO highlight the unpredictable nature of market behavior and investor sentiment, particularly in the context of smaller firms with limited operational history.
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Sudha Subbiah

27/08/2024 08:09 PM