Landmark Cars IPO shares see disappointing debut, fall 10% after negative listing

Prior to Landmark Cars’ listing, most analysts recommended investors to take a cautious approach with the IPO.

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Landmark Cars’ Rs 552 crore public issue was subscribed 3.06x.

Landmark Cars shares listed at a 7% discount below IPO price on NSE and BSE amid negative domestic market. Landmark Cars stock made its market debut at Rs 471.3 on the BSE, as compared to the public issue price of Rs 506. The scrip shortly thereafter fell to Rs 446 per share, down 10%. A tepid listing was expected as ahead of the market debut, Landmark Cars shares were trading at a discount of Rs 15 in the grey market.

“Landmark Cars has debuted as a negative listing at a discount of Rs. 471 (-6.91%) to its issue price. But the issue had received a good response from investors on both the institutional and retail sides. The company is also growing its presence in the after-sales segment. Its comprehensive business model captures the entire customer value chain and focuses on the expansion of its overall business with experienced promoters and business leadership. Nonetheless, despite fierce competition, the company must reduce its debt. The issue has been fully priced, with a P/E ratio of around 28. Under the current market conditions, it would not be fair to expect much from its listing. As a result, allottees who applied for the public offering for listing premium should keep their stop loss at Rs. 440,” said Pravesh Gour, Senior Technical Analyst, Swastika Investmart.

Landmark Cars’ public issue was subscribed 3.06x as the Qualified Institutional Buyers (QIBs) demonstrated interest in the issue, bidding 8.71x, while the retail investors portion was subscribed 59% only. Non Institutional Investors oversubscribed their quota by 1.32 times while the portion reserved for employees was bid for 2.93x.

The company intends to raise Rs 552 crore through the IPO, which comprises a fresh issue of Rs 150 crore, and an offer for sale (OFS) of Rs 402 crore by selling shareholders including TPG Growth. The company will utilise the majority of fresh issue proceeds for repaying debts besides general corporate purposes. It has debt of Rs 464 crore as of June 2022, increasing sharply from Rs 308 crore in March 2022.

Prior to its listing, most analysts recommended investors to take a cautious approach with the IPO. “The company has competition from unorganized market and unlisted players. A significant risk could be a change in dealership terms & agency agreements from OEMs,” said Religare Broking.

“Sales at LMC have grown at a CAGR of 15.8% over FY20-22, with the company turning meaningfully profitable in FY22 with PAT pegged at Rs 66 crore in FY22, led by improvement in EBITDA margin profile to ~6% vs. ~3% in FY20. At the upper end of the price band, it is valued at ~28x P/E as of FY22. We assign an UNRATED rating to the issue,” said an ICICI Direct report prior to the listing.

Landmarks Cars has a large network of car dealerships across the country, including premium brands such as Mercedes-Benz, Jeep, Volkswagen and Renault. The company also has a presence across the automotive retail value chain from sales, after-sales to authorized service centers, with over a hundred facilities over eight states in the country.

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First published on: 23-12-2022 at 10:05 IST
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