Frenzy Ride! This Rs 12-crore SME IPO receives investor bids worth Rs 4,700 cr

The initial public offer of a New Delhi-based bike showroom has come under the spotlight on Dalal Street. The ₹12-crore issue of Resourceful Automobile, which operates two Yamaha showrooms in New Delhi, received investor bids of over ₹4,700 crore.

The company has only eight employees, three in finance and legal, two in sales and marketing, one in HR and two in operations.

The issue, categorised as a Small and Medium Enterprises (SME) IPO, got nearly 400 times subscriptions on the final day of bidding on Monday. The IPO opened on August 22. It is set to list on the BSE SME platform on August 29.

Bids for 40.76 crore were received against the offered shares of 10.25 lakh. The IPO was entirely a fresh issue of 10.24 lakh shares. The company offered its shares at ₹117 apiece, and investors could bid for 1,200 shares in one lot.

Several social media participants said the demand for this SME IPO highlights the frenzy in this space, calling for tighter regulations.

According to the red herring prospectus (RHP), Resourceful Automobile plans to use the IPO proceeds to fund the expansion of its operations, including opening two new showrooms in the Delhi-NCR region, debt repayment, and covering working capital needs.

Resourceful Automobile is engaged in the business of buying, selling, and dealing in automobiles, motorcars, lorries, buses, vans, motorcycles, cycle-cars, motor, scooters, carriages and amphibious vehicles.

For the year ended February 2024, the company clocked total revenues of ₹16.53 crore and a net profit of ₹1.52 crore. It reported a negative cash flow of ₹19.33 lakh from operating activities for the period ended October 31, 2023.

Last week, the National Stock Exchange tightened norms for SME IPOs amid a surge in activity. Starting in September, only companies with positive free cash flow to equity (FCFE) in at least two of the last three financial years will be eligible to list on the SME segment.