Detailed Narrative
Q1 FY26 Performance Impacted by Industry Headwinds
Popular Vehicles reported a challenging Q1 FY26, with total income growing marginally by 1.3% YoY to ₹1,316 crores. The company recorded a loss of ₹8.8 crores, a significant decline from a PAT of ₹5.4 crores in Q1 FY25. EBITDA also saw a substantial decrease of 26.3% YoY to ₹38.3 crores, with the EBITDA margin at 2.9%. Management attributed this performance to a prolonged slowdown in the auto industry, particularly the small car segment, and weak demand momentum, with April showing a marginal uptick but May and June remaining subdued.
Strategic Expansion and Diversification Initiatives
Despite the challenging environment, Popular Vehicles is actively pursuing strategic expansion. The company secured a Letter of Intent (LOI) to establish eight 3S facilities for Bharat Benz in Punjab, marking its entry into a new state with a cumulative investment of approximately ₹12 crores. Additionally, LOIs were received for Ather in Chennai (₹75 lakhs investment) and Bangalore (₹1.2 crores investment), expanding its EV footprint. These initiatives are part of a broader strategy to diversify revenue contribution from Kerala to below 50%.
Mixed Segmental Performance with Strong EV and Luxury Growth
The new vehicle segment experienced a 1.5% YoY volume de-growth, but the average selling price increased by 1.6% to ₹977,000. The pre-owned vehicle segment showed positive development with volumes up 4.2% YoY and income up 10.2% to ₹93 crores, with ASP increasing by 5.7% to ₹362,000. The EV 2-wheeler segment demonstrated strong growth, with revenue increasing by 97.7% YoY to ₹26.8 crores. Services income grew 4.5% to ₹227 crores, despite a slight volume de-growth of 0.2%, by capturing a higher wallet share and improving ASPs.
Cost Control and Margin Management Efforts
In response to market challenges🌐, Popular Vehicles implemented effective cost control measures. Discount levels for Maruti Arena and Nexa were reduced by almost 50% compared to Q4 FY25, with Arena discounts dropping from ₹12,000 to ₹5,500-₹6,000 and Nexa from ₹15,000 to ₹7,500-₹8,000 per car. The company also undertook cost restructuring on the employee side. These efforts contributed to an improvement in operating margins and a reduction in losses compared to Q4 FY25, though overall EBITDA declined YoY.
Debt Management and Divestment Plans
The company's current debt stands at approximately ₹540 crores, which management aims to reduce by 5-6% by Q3 FY26. The blended cost of debt is currently 8-8.2% but is expected to fall below 8% in Q2 FY26 due to lower RBI rates. Popular Vehicles is also divesting its Honda and Piaggio businesses, expecting to receive approximately ₹70 crores by the end of August 2025. These funds will be strategically utilized for new acquisitions, expansion, or debt reduction.
Long-term Vision and FY26/FY27 Margin Outlook
Popular Vehicles reiterated its long-term vision to double turnover to ₹11,000 crores within 3.5 to 4 years from the current ₹5,600 crores, implying an 18-20% CAGR. The company also aims to increase its EBITDA margin from FY24's 5% to closer to 6% within the same timeframe. For FY26, excluding new acquisitions, EBITDA margins are projected to be 4-4.5%, improving to 5% by FY27. Management expressed optimism for Q3 and Q4, anticipating high growth driven by new GST norms.
Inventory Management and Impairment Reversal Expectation
The company successfully reduced its overall inventory by approximately 500 units in June, bringing the inventory days to 45-46. The target is to further reduce this to 37-38 days by the end of September. An impairment loss of ₹3 crores was recorded in Q1 FY26, which management clarified as a provision for outstanding debtors. They anticipate a reversal of this provision in Q2 FY26 due to rigorous collection efforts, which would positively impact profitability.