Landmark Cars IPO Fundamental Analysis (Avoid)

Landmark Cars IPO Limited IPO Review

Landmark Car is a premium automotive retail business in India with dealerships for Mercedes-Benz, Honda, Jeep, Volkswagen and Renault. It also caters to the commercial vehicle retail business in India. It has a presence across the automotive retail value chain, including sales of new vehicles, aftersales services 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.
Landmark started its operations and opened first dealership for Honda in 1998, and since then it expanded its network to 112 outlets in 8 Indian states and union territories, comprised of 59 sales showrooms and outlets and 53 after-sales service and spares outlets, as of June 30, 2022. The Issuer has a commercial vehicle (CV) dealership with Ashok Leyland in India.
The vehicle dealership network is spread across 32 cities in eight states and union territories including Maharashtra, Uttar Pradesh, Gujarat, Haryana, Madhya Pradesh, Punjab, West Bengal and the National Capital Territory of Delhi. It also has an online presence through its website for Group Landmark.
In FY22, Landmark contributed 15.8% to retail sales of Mercedes-Benz, 5.8% to wholesale sales of Honda, 8.7% to wholesale sales of Volkswagen, 26.8% to wholesale sales of Jeep and 5.1% to wholesale sales of Renault.

Financial Review

Landmark Car posted total revenues of Rs 801.90 crore for Q1FY23 and PAT of Rs 18.14 crore for the same period. For FY22, income from operations increased to Rs 2989.12 crore from Rs 1966.34 crore in FY21 due to increase in commission income from sales of Mercedes-Benz cars attributable to the change from dealership model to agency model. PAT increased to Rs 66.18 crore during FY22 from Rs 11.12 crore in FY21. Profitability margins can be seen from the table below.

Return on net worth has been 6.64% (Q1FY23), 26.52% (FY22) respectively and Debt to Equity is 1.25x of equity as at the end of FY22.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Financials and Ratios				Amount in INR Crores
	Q1FY23	FY22	FY 21	FY 20
Total revenue	801.9	2989.12	1966.34	2228.93
Revenue from operations	800.27	2976.52	1956.1	2218.61
PAT	18.14	66.18	11.15	-28.94
EBITDA	52.83	187.28	120.06	83.20
Total Assets	1209.37	1085.38	887.9	831.77
Net Cash from operating activities	-64.56	76.44	42.76	209.66
EBITDA Margin	6.60%	6.29%	6.14%	3.75%
Net Margin	2.27%	2.22%	0.57%	-1.30%

Valuation and Peer Comparison

The IPO is priced at 26.03x with annualized EPS of 19.44 for Q1FY23 calculated at the upper price band of Rs 506. P/E is 28.30x when calculated with EPS of 17.88 for FY22. There are no listed peers as per the RHP. The below unlisted peer comparison table compare a few of the noteworthy large PV and CV dealership groups in India. Most of these groups have dealerships of multiple OEMs, comprising the PV (mass and premium markets), luxury PV and CV segments.

Table 2 - Unlisted Peer Comparison
Unlisted Peer Comparison
Particulars	Advaith Motors	AMPL	Deutsche Motoren	Jubilant	Kataria Auto	KUN Auto	Navnit Motors	Landmark
Year of commencementM	1998	1948	2007	2009	1984	1998	1994	1998
No. of brands (Maruti, Honda etc)	2	3	2	2	3	1	6	7
Revenue from operations (FY21 INR Crores)	1350	3930	140	100	1980	1380	640	1960
Outlets	50+	50+	3+	5+	95+	7+	15+	50+
EBITDA margin	1.90%	2.80%	13.60%	22.20%	4.40%	4.80%	3.70%	6.10%
Net Profit Ratio	-1.00%	0.10%	5.30%	7.10%	0.70%	1.70%	-1.90%	0.60%
Debt to Equity	3.1	0.3	1.9	1.1	3.2	2.1	NA	1.8

Issue Details

Landmark Car IPO (Rs 552 crore) opens on 13th Dec- 15th Dec 2022 with a price band of 481-506 per share. Retail quota is 35% and investors can apply with minimum bid of 29 shares (Rs 14,674). Maximum lot size is 377 shares (Rs 1,90,762).The issue includes both, fresh issue (Rs 150 crore)and an offer for sale by investor and promoter shareholder TPG Growth (Rs 325 crore), Aastha Limited (Rs 62 crore), Mr. Sanjay Karsandas (Rs 10 crore) and by Garima Misra (Rs 5 crore). The IPO proceeds would be utilized to repay working capital loans of Rs 120 crore. The Promoter Group currently holds 60.24% of shareholding of the Company and will hold 44.61% post issue. The Issue is expected to list on 23rd Dec 2022.

Conclusion and Investment Strategy

Dealerships form an intrinsic part of the automobile sector playing the role of an intermediary between the customers and the manufacturers. Vehicle dealerships plays a role in the overall vehicle supply chain providing local vehicle distribution channel based on a contract with an automaker.

Landmark Cars has expanded its business into new cities and geographies with its longstanding relationships with OEM partners. Fresh Issue proceeds would be utilized towards repayment of working capital loans but still the debt on B/S would be more than Rs 200 crore. Sustainability of margins with growth and expansion is another concern. So one may Avoid this IPO and may consider other investment opportunities in the secondary market.

Reviewer recommends Avoid to the issue.

Review By CA Priyanka Choudhary on 11th Nov 2022

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.