Landmark Cars Ltd IPO

Published by Sharekhan Education | December 14, 2022

Amit Pathak | Sharekhan Education

Land Mark Cars Ltd IPO has an issue size of Rs. 552 Cr, price band Rs. 481-506. The issue opens on Tuesday, 13th Dec’2022 and closes on Thursday, 15th Dec’2022.

Company Overview :

Landmark Cars is the leading premium automotive retail business in India. It has dealerships for Mercedes-Benz, Honda, Jeep, Ashok Leyland, Volkswagen, and Renault. It has a presence across the automotive retail value chain, including sales of new vehicles, after-sales service, and repairs, pre-owned passenger vehicles, and facilitation of third-party sales for financial & insurance products. As of June 30, 2022, it has a network of 112outlets in 8 Indian states and union territories, comprising 59 sales showrooms and outlets & 53 after-sales service outlets.

Objects of Issue :

The IPO consists of a fresh issue of equity shares aggregating to Rs 150 crores, and an offer for sale (OFS) of up to Rs 402 crores by existing shareholders. The company will use the proceeds from the fresh issue for repayment of a portion of the existing borrowings. Listing of the equity shares will enhance its visibility and its brand image among existing and potential customers. The minimum application is to be made for 29 shares and in multiples thereafter. Post allotment, shares will be listed on BSE and NSE.

Industry Overview :

Dealerships play the role of an intermediary between the customers and the manufacturers. It also plays an important role in the aftermarket space by providing maintenance services and supplying spares/automotive parts. Dealers also provide manufacturers with customer insights that are very useful in the production planning of manufacturers. For financial institutions, dealerships provide a huge business opportunity in the form of retail finance as well as inventory funding. For insurance providers, dealerships act as an easy avenue for new customer acquisitions. As of FY22, there were around 17,000 dealerships with nearly 28,000 touchpoints across India catering to customers of 2-wheelers, PVs, CVs, 3-wheelers, and tractors. As per CRISIL Report, the luxury vehicles segment in India is expected to grow at a CAGR of 14-16% over FY2022-27.

Competitive Strengths: 

The company’s focus has been on the fast-growing premium and luxury segments of the Indian passenger vehicle market. It was the number one dealer in India for Mercedes in terms of retail sales for FY22. The company caters to the entire customer value chain. It has established robust business processes which assist in reducing costs and increasing efficiency, as well as ensuring faster operationalization of new facilities. The company has established processes for operationalizing new outlets including purchasing inventory, selecting and leasing premises, and hiring sales and technical personnel. It has an opportunity to grow the number of extended warranties sold during the next few years through the efforts of the service marketing team.

Business Strategy: 

The company aims to leverage the relationships with the OEMs to expand geographically to achieve economies of scale. It will continue to seek to acquire dealerships to expand its geographic reach in premium and luxury automotive brands. The company aims to broaden its after-sales service to reach more customers and boost higher-margin service and repair revenues. The company intends to invest in IT systems to improve process efficiencies and support sales.

Key Concerns: 

Company’s success depends on the value, perception, marketing, and overall competitiveness of their OEMs’ vehicle brands in India, and any damage to these brands could adversely affect the company’s business. The decision by any of the OEMs not to renew, terminate, or require adverse material modifications to any of the company’s dealership agreements entered with them could hurt the company’s business operations. A large portion of the company’s business operations are concentrated in the states of Gujarat and Maharashtra, and any adverse developments in these states could hurt the business.

Financials: 

During FY20-22, The company’s revenue grew at a CAGR of 10.3%. EBITDA margins increased from 3.7% to 6.3% in the same period. The company’s debt-to-equity ratio stood at 1.4x as on June 2022, post-IPO it would become 1.03x. In FY22 the company reported a Return on Equity of 26.5%. At the upper end of the price band, the IPO is priced at a P/E of 30.3x.

Source: SEBI

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