Resourceful Automobile IPO: The initial public offering of this Delhi-based two-wheeler dealership with two showrooms and eight employees was oversubscribed by over 400 times on day 3. This unprecedented demand meant that the Rs. 12 crore IPO received bids worth about Rs 4,800 crore.
This remarkable response to an SME IPO had left market experts scratching their heads, trying to understand the dynamics behind the frenzy. The astonishing subscription numbers drew admiration as well as skepticism among some market analysts.
How Market Analysts reacted to the Resourceful Automobile frenzy
Market analyst Advait Arora expressed astonishment at the high subscriptions despite the company's cash flow being in negative. He added that and the company does not even own its showrooms which could be a risk factor.
Unbelievable Euphoria in SME's: Rs 12 Cr SME #IPO receives investor bids worth Rs 4,800 cr
Oversubscribed 418 times
GMP expected at 95%+
2 showrooms, 8 employees, 17 crores in revenues, cashflow is negative & even the showrooms are rented. GAJAB ! pic.twitter.com/ufJUWkVZ6U— Advait Arora (@WealthEnrich) August 27, 2024
However, Deepak Shenoy, founder and chief executive officer of Capitalmind Financial Services Pvt., dismissed the outrage over the IPO's extreme oversubscription saying no one is forcing anyone to buy and this is just 'a sign of euphoria in the markets.'
My views on the SME IPO that seems to have caught the outrage wave. I'm not outraged at all.
It’s an SME, with a 12 crore IPO. Firstly the oversubscription is BS – your money stays in your bank account and you simply cannot get an entry easily, so you keep money in your account… https://t.co/NyELEiF4Ln— Deepak Shenoy (@deepakshenoy) August 27, 2024
Radika Gupta, CEO of Edelweiss Mutual Fund recommended exercising caution while referring to the astonishing bids. Taking to X (formerly Twitter) she wrote, "I used to have a phrase called “sins of a bull market”. This makes me think I need a much more dramatic one. Be careful folks."
I used to have a phrase called “sins of a bull market”. This makes me think I need a much more dramatic one.
Be careful folks. pic.twitter.com/Wda9k2K5Mw— Radhika Gupta (@iRadhikaGupta) August 27, 2024
Sadaf Sayeed, CEO of Muthoot Microfin mentioned how the IPO is an example of peak bull market euphoria. He was also quick to mention that the this bid frenzy is driven by GMP (Grey Market Premium) and such crazy transactions are precursors to a peaking out and the start of a downfall.
When bull market is at its peak anything sells. Resourceful Automobiles was an example of that euphoria. An auto dealership with just two showrooms and limited sales received bids worth ₹4800cr for ₹12 cr IPO. Bid frenzy is driven by GMP. But usually such crazy transactions… pic.twitter.com/GGMvguieGN
— Sadaf Sayeed (@Sadafsayeed) August 27, 2024
Akshay Jogani, co-founder of Xponent Tribe was among the earlier ones to notice the bid frenzy and had expressed his astonishment regarding the subscription numbers on the final day of subscription when the IPO was oversubscribed more than 200 times. He wrote, "Resourceful Automobile SME IPO is crazy 2 Yamaha dealership showrooms, 8 employees. Asking ₹12 Cr, got ~₹2700 Cr in bids. Market cap ~₹31 Cr (at IPO price) on a net worth of ~₹1.5 Cr. Yet 227x subscribed, could hit 300x by day’s end. Is no one asking what the terminal value of 2 dealership showrooms and 8 employees is?"
Resourceful Automobile SME IPO is crazy
2 Yamaha dealership showrooms, 8 employees.
Asking ₹12 Cr, got ~₹2700 Cr in bids.
Market cap ~₹31 Cr (at IPO price) on a net worth of ~₹1.5 Cr.
Yet 227x subscribed, could hit 300x by day’s end.
Is no one asking what the terminal…— Akshay Jogani (@kshayjogani) August 26, 2024
About Resourceful Automobile IPO
Resourceful Automobile operating under the brand name "Sawhney Automobile" launched its Initial Public Offering (IPO) on August 22 and was available for subscription until August 26. The SME IPO was a fixed price issue totalling Rs. 11.99 crore, comprising a fresh issue of 10.25 lakh shares. The shares were priced at Rs. 117 each.
The allotment of Resourceful Automobile IPO is expected to be finalised on August 27. Shares will be listed on the BSE SME platform, with the tentative listing date set for Thursday, August 29.
Resourceful Automobile IPO Subscribed More Than 400 Times On Day 3. Read more on IPOs by NDTV Profit.