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Popular vehicles and services see trading below the IPO price, signaling an uncertain market debut 

The initial public offering (IPO) of Popular Vehicles and Services, a diversified automobile dealership in India, has been a topic of much anticipation in the financial markets. However, the company's shares began trading below the IPO price, stirring various reactions among investors and market analysts.

Popular Vehicles and Services, known for its long-standing involvement in the vehicle sector and well-established ties with key Original Equipment Manufacturers (OEMs), made its initial public offering with a price bracket of at ₹280 to ₹295 per share. The IPO was a combination of a fresh issue and an offer for sale, aiming to raise up to ₹601.55 crores. Despite the company's robust financials and a fully integrated business model, the shares opened on the stock exchange at a price lower than expected.

The company's IPO has met with a positive initial response, with a Grey Market Premium (GMP) indicating a premium at which the shares were trading unofficially before their official listing. However, the actual listing did not reflect the optimism seen in the GMP, as the shares began trading below the IPO price on the listing date.

This development has led to mixed sentiment in the market, with some investors viewing it as a buying opportunity, while others are cautious, considering it a sign of overvaluation during the IPO. The automobile sector is vulnerable to shifting economic conditions, and a drop in vehicle demand can have a negative influence on business prospects and operating results. Popular Vehicles and Services' relies on its top two OEMs, Maruti Suzuki and Tata Motors, which account for more than 80% of the company's total sales exposing it to significant control and constraints that are imposed by these OEMs.

Non-renewal, termination, or other adverse material alterations made by OEMs to dealership agreements might have a significant negative impact on the company's business prospects and results of operations. Additionally, the company has not received the required approval from the Central Government for the appointment of John K. Paul as a Whole-time Director, adding to the uncertainty.

Financial analysts suggest that the dip below the IPO price could be attributed to several factors, including market volatility, investor sentiment, and the company's valuation in comparison to its peers. The automotive industry's performance is closely tied to the overall economy, and any fluctuations can have a direct impact on companies like Popular Vehicles and Services.

Despite the lower-than-expected trading price, the company's fundamentals remain strong. It reported a revenue of ₹2,514 crores for Fiscal 2023, with total assets amounting to ₹1,866 crores. The company's fully integrated business model, which caters to the complete life cycle of vehicle ownership, provides business stability and higher margins. Its proven ability to identify and capture inorganic as well as organic growth opportunities continues to be a strength.