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About the company:
Established in CY1998, it is a leading premium automotive retail business in India with dealerships for Mercedes-Benz, Honda, Jeep, Volkswagen, and Renault. They also have a commercial vehicle dealership with Ashok Leyland in India. They have a presence across the automotive retail value chain, including sales of new vehicles, after-sales service, and repairs (including sales of spare parts, lubricants, and accessories), sales of pre-owned passenger vehicles, and facilitation of the sales of third-party financial and insurance products.
They were the number one dealer in India for Mercedes in terms of retail sales for Fiscal 2022, the number one dealer in India for Honda and Jeep in terms of wholesale sales for Fiscal 2022, and were the top contributor to Volkswagen retail sales for the calendar year 2021. In addition, they were the third largest dealership in India for Renault in terms of wholesale sales contribution for the calendar year 2021.
Distribution network of Landmark Cars Limited:
The company has expanded its network to include 112 outlets in 8 Indian states and union territories, comprised of 59 sales showrooms and outlets and 53 after-sales services and spares outlets, as of June 30, 2022
The Objective of the Issue
The Fresh Issue proceeds will be utilized for:
1) Pre-payment, in full or in part, of borrowings availed by our Subsidiaries; and
2) General corporate purposes.
Key Financials
The revenue of the company is fluctuating, but an overall growth trend can be seen. The revenue grew from Rs.22,289.33 million in fiscal 2019 - 2020 to 29,891.16 million in fiscal 2021 - 2022. Although it declined to 19,663.43 in fiscal 2020-2021, the CAGR is 15.80%. The revenue is Rs. 8,019.03 million in the first quarter of the current fiscal.
The EBITDA of the company has grown with a CAGR of 50.03% for the 3 financial years depicted in the above graph. On a percentile basis, the EBITDA Margin has grown from 3.73% in FY 2019 – 2020 to 6.27% in FY 2021 – 2022, a CAGR of 29.65%.
The Net Profit seems to be very positive as the company has faced a loss in FY 2019 – 2020 but consistently earned profits in FY 2020-2021 and FY 2021-2022 of Rs. 111.48 million and Rs. 661.82 million. The trend seems to be promising because it has earned a net profit of Rs. 181.42 million (greater than the entire 2020-2021 financial year) in the first quarter of the current financial year.
The profit trend is also visible in the earnings ratio as the company has successfully turned negative ratios into positive ratios.
Peer comparison and valuation
Considering the upper price band of 506 per share and the last 3-year weighted average EPS of 8.44 INR, it translates into a PE of 60x. And PB ratio is 7x (based on the June 2022 book value of 73.25 INR). There are no listed companies in India that engage in a business similar to that of the Company. Accordingly, it is not possible to provide an industry comparison with the Company.
Key risks
1) They are subject to the significant influence of, and restrictions imposed by OEMs pursuant to the terms of dealership or agency agreements that may adversely impact the business, results of operations, financial condition, and prospects, including their ability to expand into new territories and acquire additional dealerships.
2) The agreements governing indebtedness contain certain restrictive covenants and their inability to comply with these covenants could adversely affect their business.
3) A large portion of their business operations are concentrated in the states of Gujarat and Maharashtra, and any adverse developments in these states could have an adverse effect on their business.
IPO details and subscription
The IPO starts on 13th Dec 2022 and will end on 15th Dec 2022 with an issue size of Rs. 552 Cr (Fresh issue-150 Cr & Offer for Sale- 402 Cr). The lot size will be 29 shares and a retail investor can apply for a maximum of 13 lots. The price band offered by the company is Rs. 481 – 506 per share. As at the time of releasing this blog the Grey Market Premium is 1.58%.