Resourceful Automobile coming with IPO to raise Rs 11.99 crore

Resourceful Automobile

• Resourceful Automobile is coming out with an initial public offering (IPO) of 10,24,800 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 117 per equity share.
• The issue will open on August 22, 2024 and will close on August 26, 2024.
• The shares will be listed on SME Platform of BSE.
• The share is priced 11.70 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Swastika Investmart.
• Compliance Officer for the issue is Drishti Jaiswal.

Profile of the company

Resourceful Automobile is actively involved in the dealership of two-wheeler bike of Yamaha, operating under the showroom name “Sawhney Automobile”. Specializing in the sales and servicing of motorcycles and scooters, with quality products and exceptional customer service, making it a trusted destination for motorcycle enthusiasts. Sawhney Automobile caters to a diverse range of customer preferences and needs by offering a comprehensive selection of two-wheelers. The inventory encompasses commuter bikes, sport bikes, cruisers, and scooters sourced from reputable manufacturers. As an authorized Yamaha dealership, it guarantees customers access to the latest models and authentic spare parts. Its dealership goes beyond sales, providing expert guidance to assist customers in selecting the right bike, arranging test rides, and offering financing options for enhanced accessibility. The company takes pride in its advanced service center, where skilled technicians handle routine maintenance, repairs, and ensure the availability of genuine spare parts to uphold the longevity and performance of the bikes it sells.

The mission of the company is to offer a diverse range of high-quality motorcycles, exceptional service, and fostering a community that celebrates the spirit of freedom and exploration on two wheels. The company is committed to innovation, integrity, and customer satisfaction, and it strive to be the premier destination for every rider’s journey. The vision of the company is to set industry standards, cultivate a vibrant rider community, and leave a legacy of excellence that resonates with the spirit of the open road.

The company is actively engaged with the riding community through events, group rides, and sponsorships. This involvement fosters a sense of camaraderie among customers and enthusiasts. Recognizing the significance of the digital landscape, the dealership maintains a robust online presence, featuring a user-friendly website that provides information on products, promotions, and a platform for online inquiries. The company operates with integrity, adhering to all industry regulations and standards. The dealership places a high emphasis on transparency in pricing, ensuring customers have a clear understanding of their purchase. It is committed to environmental responsibility. This may include compliance with emission standards, promoting fuel-efficient models, and exploring eco-friendly alternatives, such as electric two-wheelers.

Proceed is being used for:

• Carrying on expansion of the company by opening of new showrooms in Delhi/ NCR.
• Repayment of debt.
• Meeting incremental working capital requirements.
• General corporate purpose and to meet public issue expenses.

Industry Overview

The two-wheeler market in India has expanded significantly, and it now plays a crucial role in the nation's transportation infrastructure. India has seen rapid expansion in the two-wheeler sector, making it one of the biggest in the world. Due to their cost, convenience, and efficiency in crowded metropolitan areas, two-wheelers, particularly motorcycles and scooters, are quite popular. The Indian two-wheeler industry has witnessed a steady increase in and production over the years contributing to this growth include rising disposable incomes, expanding middle- class, improving infrastructure, and increasing urbanization Additionally, the easy availability of financing options has made two-wheelers more accessible to a broader consumer base In order to meet the diverse demands and tastes of its customers, major local and foreign businesses compete in the Indian two-wheeler industry by offering a variety of models. Intense rivalry on the market drives ongoing product innovation, technical improvements, and aggressive marketing tactics. In India, motorcycles account for a sizeable percentage of the two-wheeler market, with commuter and luxury models enjoying widespread customer appeal. In recent years, scooters have also gained a lot of popularity, especially among female riders and urban commuters.

The demand for two-wheelers in India has increased as a result of urbanization, a growing middle class, and increased affordability. Two-wheelers are seen as an affordable and practical means of transportation, especially in crowded metropolitan areas. The two-wheeler sector of the automotive industry, as well as other policies and initiatives, have been supported by the Indian government. Measures including decreased excise taxes, tax breaks, and loosened license requirements have boosted manufacturing and investment in the industry. With a focus on sustainability and environmental issues, electric two-wheelers are becoming more popular in India. To keep up with changing consumer tastes and governmental requirements, manufacturers are investing in the research and development of electric cars.

Initiatives like Make in India, the Automotive Mission Plan 2026, and NEMMP 2020 will give a huge boost to the sector. The government introduced a battery swapping policy, which will allow drained batteries to be swapped with charged ones at designated charging stations, thus making EVs more viable for potential customers. Further, to install electric vehicle supply equipment (EVSE) infrastructure for EVs, various public sector firms, ministries, and railways have come together to create infrastructure, and manufacture components. Going forward, rising income and a growing young population, greater availability of credit and financing options and demand for commercial vehicles increasing due to the high level of activity in the infrastructure sector will provide the sector continued support in the coming time.

Pros and strengths

Wide range of products: Sawhney Automobile proudly offers a diverse range of two-wheelers, catering to various customer preferences and needs, with an unwavering commitment to quality service. The company has earned a commendable reputation for reliability and quantity due to its adherence to uncompromising standard of quality. The objective is to delight customers at reasonable prices. The company’s management team is focused on delivering quality products for all kind of premium bikes. It offers expert guidance to assist customers in selecting the perfect bike, facilitate test rides, provide accessible financing options, and ensure quality service to enhance the overall purchasing process.  

Locational advantage: The company operates from its registered office at Dwarka, Delhi, which is strategically located and is well connected by roads. Further, the company deals in premium bikes and luxurious scooters which are passionate for the wealthy and HNIs of the capital of the country. Thus, the location of the site is very advantageous to the company.

Brand Partnerships: As an authorized dealer of Yamaha India, Sawhney Automobile has forged partnerships with leading motorcycle manufacturers, ensuring not only a diverse product range but also a commitment to quality service. This strategic alliance guarantees that its customers have exclusive access to the latest models and genuine spare parts. This partnership underscores its dedication to providing a superior and unparalleled experience to motorcycle enthusiasts, backed by the renowned excellence of Yamaha India. 

Risks and concerns  

Major revenue comes from dealership of Yamaha (Commercial): The company’s growth is highly dependent on the growth of its OEMs like Yamaha Motors (Commercial). The company is subject to concentration risk in the event of any adverse events or financial distress, including bankruptcy, impacting Yamaha Motors (Commercial). Its OEMs are entitled to unilaterally terminate and could attempt to terminate all or certain of their dealership arrangements with it in the event of breach of any of the terms and conditions agreed upon under the dealership agreements. If the company’s OEMs become insolvent or bankrupt it can terminate the dealership agreement with them but it may be unable to collect some or all of the receivables due from such OEM(s). Non-renewal or termination or to require adverse material modifications of its dealership agreements with its OEMs or any adverse material modifications made by its OEMs thereto, will have a material and adverse impact on its business prospects and results of operations. Further, these OEMs may be adversely impacted by economic downturns, governmental laws and regulations, import restrictions, significant declines in the sales of their new vehicles, natural disasters, pandemics such as COVID-19, increases in interest rates, decline in their credit ratings, labor strikes, supply shortages or rising raw material costs, rising employee benefit costs, vehicle recall campaigns, product defects, unappealing vehicle designs, adverse publicity that may reduce consumer demand for their vehicles, competition from other OEMs, failure to appropriately adapt to changing customer preferences, poor product mix or other adverse events.

Vehicles and commercial vehicles sale is subject to seasonality: Sale of bikes and commercial vehicles is subject to seasonality as it typically sees a dip in sales during the first quarter of each financial year. The company’s sales are considerably higher during the second and third quarter of the year due to the festival season like Diwali, Navratri, Dussehra etc. Accordingly, its results of operations in one quarter may not accurately reflect the trends for the entire financial year and may not be comparable with its results of operations for other quarters.

Geographical constrain: The company’s 100% of the total revenue is concentrated and derived from dealership operations in the state of Delhi. The concentration of all of its operations in Delhi heightens its exposure to adverse developments related to regulation, as well as economic, demographic and other changes in the state. In the event of a slowdown in the economic activity in the state, or any other developments including natural disasters, political unrest, disruption or sustained economic downturn, it may experience an adverse impact on its business, results of operations and financial condition, which are largely dependent on the performance and other prevailing conditions affecting the economies of the state. Furthermore, the states of Delhi have experienced social and civil unrest in the past and such tensions could lead to political or economic instability and a possible adverse effect on its business, results of operations and financial condition. There can be no assurance that such situations will not recur or be more intense than in the past.

Outlook

Resourceful Automobile was founded in 2018 and sells Yamaha two-wheelers under the name “Sawhney Automobile”. Sawhney Automobile offers a comprehensive range of two-wheelers to fulfill a variety of customer wants and needs. The range includes commuter bikes, sports bikes, cruisers, and scooters from renowned manufacturers. The company currently has two conceptual showrooms with an attached workshop. The Blue Square showroom in Dwarka, New Delhi, showcases the entire range of Yamaha two-wheelers, apparel, and accessories. Another showroom is located on Palam Road in New Delhi. This showroom offers a wide range of high-quality and distinctive two-wheelers, including the latest models from Yamaha India and a diverse collection of motorcycles. On the concern side, a large portion of the company’s business revenue is derived from its dealership of Yamaha (Commercial). Any adverse developments in the growth, demand or sales for these OEMs could have an adverse effect on its business, results of operations and financial condition. Also, total portion of its business operations are concentrated in the states of Delhi and any adverse developments in these states could have an adverse effect on its business, results of operations and financial condition.

The company is coming out with a maiden IPO of 10,24,800 equity shares of Rs 10 each at a fixed price of Rs 117 per share to mobilize Rs 11.99 crore. On performance front, During FY23, the company's revenue from operations and other income increased to Rs 1938.26 lakh, from the amount of Rs 1,250.10 lakh recorded in FY22. Due to the increase in demand of two wheelers, the company was able to expand their client base and increase revenue. The restated profit after tax for FY23 has been significantly increased to Rs 41.50 lakh as against Rs 28.73 lakh in the FY22. The company is into the business of diverse range of two-wheelers, catering to various customer preferences and needs. The inventory includes commuter bikes, sport bikes, cruisers, and scooters from renowned manufacturers for more than six years whereas its peer group industry players/competitors have the benefit of longer operating history in comparison with it, and therefore, its brand development is at a relatively nascent stage. Considering its current market presence with its customers in diversified sectors and geographies in order to further penetrate the market. Moreover, the company provides a range of product specifications in all its product categories i.e. commuter bikes, sport bikes, cruisers, and scooters from renowned manufacturers. As an authorized dealership, it holds partnerships with top motorcycle manufacturers. This ensures that customers have access to the latest models and genuine spare parts. It intends to further enhance its value proposition by dealing in value added products, which have better margins and wider markets.