SME IPOs: The craziest corner of the bull market is getting crazier
₹18.8 crore during FY23. Profit after tax was ₹41.5 lakh. For the 11 months ended 29 February 2024, revenue was ₹16.5 crore, with a PAT of ₹1.5 crore.
Resourceful Automobile tapped the BSE’s SME IPO platform from August 22 to August 24 to raise ₹11.9 crore, selling 10,24,800 shares at ₹117 apiece. This translates to an almost 39% stake in the company. To put this in plain English, a run-of-the-mill two-outlet bike dealership in the national capital sought a market valuation of ₹31 crore.
Full marks for chutzpah, it must be said. Confounding all the arm-chair scoffers, the SME IPO was oversubscribed 400 times. The retail portion drew oversubscription of almost 500 times.
Have Indian investors come under the grip of an unexplained collective hallucination? Swastika Investmart Ltd, the lead manager to the issue, does not think so. “They are on the verge of expanding with two additional showrooms. This planned expansion offers significant growth prospects, which have been factored into the valuation," Sunil Nyati, managing director at Swastika Investmart, told Mint.
“Moreover, as Resourceful Auto is unique in its segment with no direct listed peers for comparison, the valuation is based on a multiple that considers their future potential rather than just their current operations." However, he acknowledged that many investors could just be fishing for listing-day gains. “The application of ASBA (Application Supported by Blocked Amount) guidelines means that investors' funds are only deducted if they receive an allotment, with funds unblocked if they do not. This encourages more investors to apply, as their funds are blocked in their own accounts till the allotment is decided," he added.
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