All About Frenzy of Resourceful Automobile IPO: Subscribed 419x

The recent initial public offering (IPO) of Resourceful Automobile, a Delhi-based two-wheeler dealership, has sent shockwaves through the Indian market. Despite its modest size, with just two outlets and a workforce of eight, the company’s ₹12 crore IPO received an astounding response, attracting bids worth nearly ₹4,800 crore.

Founded in 2018 under the Sawhney Automobile brand, Resourceful Automobile specialises in the sales and servicing of Yamaha motorcycles and scooters. The company’s IPO, which was open for subscription from August 22 to 26, saw an overwhelming demand, with bids for 40.76 crore shares against the 9.76 lakh shares on offer. This translated into a subscription of 419 times on the third day of the bidding process.

On Day 1, the SME IPO was subscribed 10.35 times and 74.13 times on Day 2. Retail investors, in particular, showed immense enthusiasm, subscribing 496.22 times.

This frenzy occurred despite repeated warnings from regulators about the risks associated with investing in small and medium-sized enterprises (SMEs). In March, Sebi Chairperson Madhabi Puri Buch raised concerns about “price manipulation” in SME platform listings and trading, urging investors to exercise caution.

Resourceful Automobile’s public issue comprised 10.25 lakh equity shares, priced at Rs 117 each, aggregating to an issue size of ₹11.99 crore. The company intends to use the proceeds to expand its operations by opening new showrooms in Delhi/NCR, repay debt, meet incremental working capital requirements, and fund general corporate purposes. As of December 28, 2023, the company operates through its network of 2 showrooms and has a total of 8 employees.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.