Finelistings Technologies coming with IPO to raise Rs 13.53 crore

Finelistings Technologies

• Finelistings Technologies is coming out with an initial public offering (IPO) of 11,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 123 per equity share. 
• The issue will open for subscription on May 7, 2024 and will close on May 9, 2024.
• The shares will be listed on BSE SME Platform.
• The share is priced at 12.30 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Fedex Securities.
• Compliance Officer for the issue is Tej Bharatkumar Hanj.

Profile of the company

The company is engaged in diversified business viz., (a) retail of pre-owned luxury car; and (b) software development services, that address digital transformation, data analytics, technology consulting, infrastructure and security needs of its customers. Its offerings are spread across the spectrum of various digital technologies such as cloud-based services, IT consulting services such as, big data analytics, cloud architecture, data engineering, IoT solutions and offering based solutions such as, business intelligence analytics, cloud development, cloud solutions, data management, digital transformation, IoT development and web development.  Under its pre-owned luxury car retail business, it is focused on the used premium and high-end luxury cars. It currently have a limited presence over the pre-owned value chain, such as after sales services and repairs (including sales of spare parts, lubricants and accessories), which it undertakes through its affiliated service centers. It also helps its clients in securing financial assistance from third-party financers. 

As its strategy, It engage in the buy-n-sell model where it procures the pre-owned cars from its owners, under take necessary services, refurb the cars mechanically and aesthetically to make it ready for display in its showroom and also on its website and other multi-channel auto platforms. The automotive ecosystem is highly fragmented and complex. The process of buying vehicles requires buyers to go through several channels and numerous stages. Its vision is to create an O2O (online-to-offline) ecosystem for automobiles which connects customers, OEMs, dealers, banks, insurance companies and other stakeholders. 

Its pre-owned luxury car business offers a wide range of cars, including sedans, SUVs, sports cars, and convertibles. All the vehicles it purchases are thoroughly inspected and certified, ensuring that they meet its high standards for quality and reliability. In addition to selling vehicles, it also offers financing, warranties, and maintenance services to ensure that its customers make the most of their investment. It also leverage on the experience and expertise of its promoters, in providing software development services which includes, digital transformation, data analytics, technology consulting, infrastructure and security needs of its customers. Its offerings are spread across the spectrum of various digital technologies such as cloud-based services, IT consulting services such as, big data analytics, cloud architecture, data engineering, IoT solutions and offering based solutions such as, business intelligence analytics, cloud development, cloud solutions, data management, digital transformation, IoT development and web development.

Proceed is being used for:

• Purchase of software
• Meeting working capital requirements
• General corporate purpose

Industry overview

The Indian used car market was valued at $32.14 billion, and it is expected to reach $74.70 billion, registering a CAGR of 15.1% during the forecast period. The COVID-19 pandemic had a minimal impact on the industry. With the increased number of people preferring individual mobility and more finance options available in the used car market, the market is set to grow considerably. Due to the pandemic’s reduced cash inflow, buyers have been forced to look for alternatives to new cars, and the used car industry has high growth potential in this regard. As the pandemic has hampered new vehicle sales and production, the used car market is gaining traction among buyers. 

The Indian used car market is expanding due to rising demand for luxury vehicles. The sale of used luxury cars increased by 20%. Due to the high cost of a luxury car, it was difficult to obtain one until recently. However, this trend is changing as consumers can now purchase used luxury vehicles. With easy access to financing options, annual maintenance contracts, and lower entry prices, the market is becoming more organized. Furthermore, the average age of used luxury vehicles entering the market is between 2 and 3 years, versus 5-6 years for a mid-size or small-scale vehicle, making them a better option in some cases.

The IT & BPM sector has become one of the most significant growth catalysts for the Indian economy, contributing significantly to the country’s GDP and public welfare. The IT industry accounted for 7.4% of India’s GDP in FY22, and it is expected to contribute 10% to India’s GDP by 2025. As innovative digital applications permeate sector after sector, India is now prepared for the next phase of growth in its IT revolution. India is viewed by the rest of the world as having one of the largest Internet user bases and the cheapest Internet rates, with 76 crore citizens now having access to the internet. The Indian IT & business services industry is expected to grow to $19.93 billion by 2025. Spending on information technology in India is expected to reach $144 billion in 2023. By 2026, widespread cloud utilisation can provide employment opportunities to 14 million people and add $380 billion to India’s GDP.

Pros and strengths

Quality assurance: It is committed to maintain quality at all steps from procurement of Cars till handling of them to the desired buyers. It has established a quality control team which has the responsibility to ensure compliance with testing, checking, and refurbing. Before commencement of the selling process, the inventory (Cars) purchased by the company have to undergo a quality check, to ensure that they are of relevant quality and match the standards as specified.

Diversified business offerings: The company is engaged in diversified business viz., (a) retail of pre-owned luxury car; and (b) software development services, that address digital transformation, data analytics, technology consulting, infrastructure and security needs of its customers. Its offerings are spread across the spectrum of various digital technologies such as cloud-based services, IT consulting services such as, big data analytics, cloud architecture, data engineering, IoT solutions and offering based solutions such as, business intelligence analytics, cloud development, cloud solutions, data management, digital transformation, IoT development and web development.

Brands and customer experience driving powerful network effects: Its brand ‘Finecars’ is a trusted brand for pre-owned automotive buyers and sellers. It strengths of its brand and its association with trust, quality and reliability is a key attribute in its business, which increases consumer confidence and influences their consumption behaviors. Its customer confidence has helped the company in achieving a sale of over 100 cars since 2020. Its O2O (online-to-offline) model, helps in building the confidence of its customer on its existence and providing a hybrid experience of on-line and off-line. 

Risks and concerns

Depend on limited number of customers: Its top ten customers contributed 70.83%, 65.71%, 51.91% and 83.99% respectively portion of its revenues from operation for the stub period ended on February 29, 2024 and for the Financial Year ended March 31, 2023, Financial Year ended March 31, 2022, Financial Year ended March 31, 2021. However, the composition and revenue generated from these customers might change as it continues to add new customers in normal course of business. Its reliance on a limited number of customers for its business exposes to risks, that may include, but are not limited to, reductions, delays or cancellation of orders from its significant customers, a failure to negotiate favourable terms with its key customers or the loss of these customers, all of which would have a material adverse effect on the business, financial condition, results of operations, cash flows and future prospects of the company.

Rely on third-party service provider: It relies on third-party lenders to finance customers for car purchases. It also relies on third parties for technology such as network infrastructure for hosting websites and applications, online distribution portals and payment gateways for ecommerce transaction. Such portals and gateways are often susceptible to security concerns and require technological upgradations. Further any significant changes in the commission charged by such online portals for distributing its products or any increase in fee charged by such payment gateways may adversely affect its business and results of operations.

Do not have long-term agreements with suppliers: Its business is significantly affected by the availability of pre-owned cars. It is mostly dependent on external suppliers for cars. The prices and supply depend on factors beyond its control, including general economic conditions, competition, brands and conditions of cars, inventory levels, refurbished cost and credit terms. If, for any reason, its suppliers discontinue their delivery to it at prices that are competitive or expected by the company, its ability to meet the requirements of its customers could be impaired and its earnings and business could suffer. It usually does not enter into long-term supply contracts with any of its suppliers and typically it purchases used cars from third party suppliers under contracts of shorter period or the open market. The absence of long-term contracts at fixed prices exposes the company to volatility in the prices of used cars that it requires and it may be unable to pass these costs onto its customers, which may reduce it profit margins.

Outlook

The company is engaged in diversified business viz., (a) retail of pre-owned luxury car; and (b) software development services, that address digital transformation, data analytics, technology consulting, infrastructure and security needs of its customers. Its offerings are spread across the spectrum of various digital technologies such as cloud-based services, IT consulting services such as, big data analytics, cloud architecture, data engineering, IoT solutions and offering based solutions such as, business intelligence analytics, cloud development, cloud solutions, data management, digital transformation, IoT development and web development. The Company opened its first showroom under the brand ‘Fine cars’. On the concern side, it operates in a competitive atmosphere. Some of its competitors may have greater resources than those available to it. While product quality, brand value, distribution network, etc. are key factors in client decisions among competitors, however, reliability and competitive pricing is the deciding factor in most cases. It faces fair competition from both organized and unorganized players in the market markets. 

The company is coming out with an IPO of 11,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 123 per equity share to mobilize Rs 13.53 crore. On performance front, its total revenue increased by 100.28% from Rs 694.32 lakh for the Financial Year ended March 312022 to Rs 1,390.62 lakh for the Financial Year ended March 31, 2023. This increase was primarily due to increase in revenue from operation where the Company engaging in sale of software services. It recorded a profit after tax of Rs 176.85 lakh for the Financial Year ended March 31, 2023 from a loss of Rs 15.10 lakh for the Financial Year ended March 31, 2022. Going forward, it aims to be a leading premium and luxury pre-owned cars retailer through the use of technology, which it will helps it scale more quickly and efficiently. While it lists its cars on 3rd party platforms, it plans to create a dedicated platform to cater to premium and luxury segment through its mobile application. It looks to engage with its customers through their preferred mode of customer service experience. As such, it looks to expand its customer engagement by continuing to invest in its online presence.