Resourceful Automobile, a 12-Employee Firm, Stuns Market with 418x Oversubscription for SME IPO

A Delhi-based motorbike dealer, Resourceful Automobile, has taken the market by storm, receiving an unprecedented response to its IPO. The company launched an IPO aiming to raise Rs 12 crore, but ended up attracting bids worth a staggering Rs 4,800 crore.

Operating under the name ‘Sawhney Automobiles’ with two Yamaha showrooms in New Delhi, the company witnessed its IPO being oversubscribed by 418.27 times by the close of the third day of bidding. Initial subscriptions were strong, with the IPO being oversubscribed 10.35 times on Day 1 and an impressive 74.13 times on Day 2.

Swastika Investmart, the merchant banker managing the IPO, reported that nearly 40.8 crore shares were bid for by the end of the subscription window, according to BSE data.

The funds raised through the IPO will be directed toward expanding operations, including the opening of two additional showrooms in the Delhi-NCR region, repaying debt, and meeting working capital requirements, as outlined in the company’s red herring prospectus (RHP). The allotment is set to be announced on August 27 by Cameo Corporate Services.

Despite Resourceful Automobile reporting a negative cash flow of Rs 19.33 lakh from its operating activities as of October 31, 2023, the high liquidity and extraordinary oversubscription have left many market observers baffled.

The remarkable response to the IPO has ignited social media discussions, with one user, Viral Nagda, noting, “Indian Markets Hit Fever Pitch as Resourceful Automobile’s IPO is Oversubscribed by 200x Despite Negative Cash Flow. #ResourcefulAutomobile sought Rs 12 cr, received Rs 2,400 cr. Despite two years of negative cash flow, the grey market premium soars over 70 per cent.”

This overwhelming success highlights the significant interest and potential rewards of small-scale IPOs in India, even for companies with modest resources and a limited workforce.