IPO Analysis: Landmark Cars Limited

IPO Rating: Invest for long term

About the issue: 

Landmark Cars Limited is in the premium automotive retail business in India with dealerships for Mercedes-Benz, Honda, Jeep, Volkswagen and Renault. The company also caters to the commercial vehicle retail business of Ashok Leyland in India.

Landmark Cars is coming out with IPO and offering 10,909,091 equity shares with a face value of Rs 5 aggregating up to Rs 552.00 crore. The issue is priced at Rs 481 to Rs 506 per share. The minimum order quantity is 29 shares.  

The IPO opens on December 13, 2022, and closes on December 15, 2022. Link Intime India Private Ltd is the registrar for the IPO. The shares are proposed to be listed on BSE, and NSE.

The Landmark Cars IPO listing date is not yet announced, but the tentative date for the listing is December 23, 2022. 

Objects of the issue:

The company proposes to utilise the Net Proceeds from the Fresh Issue towards funding the following objects: 

1. Repayment/pre-payment, in full or in part, of certain borrowings availed by the Company and Subsidiaries. 

2. General corporate purposes. 

Promoter Holdings: 

- The Pre holding of the company is 60.24 per cent
- Post Issue the shareholding will be 44.61 per cent



About the company:

Incorporated in 1998, Landmark Cars Limited is the leading premium automotive retail business in India with dealerships for Mercedes-Benz, Honda, Jeep, Volkswagen and Renault. The company also cater to the commercial vehicle retail business of Ashok Leyland in India. 

Landmark Cars offers services such as sales of new vehicles, after-sales service and repairs (including sales of spare parts, lubricants and accessories), sales of pre-owned passenger vehicles and facilitation of the sales of third-party finance and insurance products. 

The company has expanded the network to include 112 outlets in 8 Indian states, comprised of 61 sales showrooms and outlets and 51 after-sales services and spare outlets, as of September 30, 2021.

The company operates as an authorised service centre for Mercedes-Benz, Honda, Volkswagen, Jeep, Renault and Ashok Leyland. It also provides after-sales services and repairs through its 51 after-sales services and spare outlets, as of September 30, 2021.

The company's business model captures the entire customer value chain including retailing new vehicles, servicing and repairing vehicles, selling spare parts, lubricants and other products, selling pre-owned passenger vehicles and distribution of third-party finance and insurance products. 

Financials:

The number of vehicles sold has increased from 16,730 and 13,282 in FY20 and FY21 respectively to 19,264 vehicles in FY22, which represents an increase of more than 40 per cent. The number of vehicle services has also increased from 221,468 to 279,078 from FY21 to FY22.

If we look at the top line of the company, the total revenue for FY22 is Rs 2976.523 crore compared to Rs 1956.104 crore in FY21. In the case of bottomline for FY22 it was Rs 66.18 crore, for FY21 it was Rs 11.14 crore and for FY20 there was a loss of Rs 28.93 crore.  RoE witnessed a steady increase from 6.1 per cent in FY21 to 26.7 per cent in FY22, due to a change in the business model by Mercedes-Benz with the lean inventory at the dealer end, eliminating the sizable working capital requirement. The company’s Net-Debt/Equity remained constant at 0.9 per cent during FY20-FY22.   

For the first quarter of FY23, the total revenue from operations of the company stood at Rs 800.27 crore and the net profit of the same quarter is Rs 18.142 crore.

Valuation and Outlook:

If we look at the valuations, the basic EPS for the recent year, i.e FY22 is Rs 17.88. Nonetheless, considering the earnings of the first quarter of FY23 and annualising EPS after considering the IPO dilution EPS comes at Rs 18.32. This discounts the IPO 27.62 times at a higher price band of Rs 506.

This looks a bit expensive, however, looking at improving financials investors can invest for the long term as all the current positives are already discounted in the current price.