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    Popular Vehicles and Services Limited

    PVSL
    Automobile and Auto Components·30 May 2025
    Management Summary

    Popular Vehicles faced a challenging FY25 with subdued demand, leading to a significant decline in profitability and a net loss. The company is strategically divesting non-core assets for ₹70 crores to reinvest in core business expansion and has implemented cost-saving and inventory management initiatives. Management expresses confidence in a recovery for FY26, targeting a 5.1% EBITDA margin and substantial service revenue growth.

    Highlights

    5
    • Divestment of Piaggio and Honda businesses for ₹70 crores, expected to complete by July 2025, to accelerate core business growth.

    • Proceeds from divestment to be utilized for network expansion, particularly outside Kerala, aiming to reduce Kerala's contribution to sub-50%.

    • Successful reduction of inventory levels back to March '24 levels by the close of FY25 through aggressive retail initiatives.

    • Strategic partnership with Accenture expected to increase annual finance income by ₹3-4 crores and service revenue by ₹4 crores.

    • Manpower correction measure expected to deliver an annualized benefit of ₹7 crores in FY26.

    Concerns

    5
    • FY25 was a challenging year with subdued retail demand, especially in entry-level and small car segments.

    • EBITDA for FY25 decreased by 38% to ₹175 crores from ₹286 crores in FY24.

    • The company reported a net loss of ₹10.5 crores in FY25, compared to a PAT of ₹76 crores in FY24.

    • Q4 FY25 EBITDA decreased by 58% to ₹30 crores from ₹71 crores in Q4 FY24.

    • Q4 FY25 resulted in a loss of ₹13 crores, compared to a PAT of ₹20 crores in Q4 FY24.

    What Changed2

    vs Q1 FY26

    Guidance items7 → 17 (+10)Risks discussed4 → 3 (-1)
    Key financials

    Metrics

    8

    Periods

    2

    Q4 FY25

    4
    • Total Income
      ₹1,376.2 Cr
      YoY+0.3%
    • EBITDA
      ₹30 Cr
      YoY-58.0%
    • EBITDA Margin
      2.2%
    • PAT
      ₹-13 Cr

    FY25

    4
    • Total Income
      ₹5,561 Cr
      YoY-1.5%
    • EBITDA
      ₹175 Cr
      YoY-38%
    • EBITDA Margin
      3.2%
    • PAT
      ₹-10.5 Cr

    Segment breakdown

    New Vehicle Business (FY25)
    44,087 Sales Volume₹4,035 Cr Income9.15 lakh Average Selling Price
    Pre-owned Business (FY25)
    10,600 Sales Volume₹361 Cr Income3.39 lakh Average Selling Price
    Services & Repair Business (FY25)
    10,42,000 vehicles Volumes₹894 Cr Income8,575 Rs Average Selling Price
    Spare Parts Distribution (FY25)
    ₹264 Cr Income
    PV Revenue (FY25)
    ₹3,301.1 Cr Revenue
    Commercial Vehicles Revenue (FY25)
    ₹1,882 Cr Revenue
    EV Revenue (FY25)
    ₹87 Cr Revenue
    List

    Capital allocation

    3
    high confidence
    CategoryHeadline
    Capex

    ₹30 crores

    Debt

    2.2x EBITDA

    M&A

    Kuttukaran Green Private Limited (Piaggio) and Vision Motors Private Limited (Honda)

    divestment · announced · Consideration ₹NaN (undisclosed)

    Guidance & targets

    17
    CategoryTargetPriority
    Volume
    Long-term growth year-on-year
    15%
    High
    Margin
    EBITDA Margin
    5.1%
    High
    Margin
    EV margin (Ather)
    beyond 5%
    High
    Margin
    Service business EBITDA margin
    12-13%
    High
    Cost Savings
    Manpower cost savings
    ₹7 crores
    High
    Income
    Service income increase
    ₹4 crores
    High
    Income
    Finance income increase per car
    ₹3-4 crores
    High
    Revenue
    Service revenue growth
    20-25%
    High
    Inventory
    ARENA inventory days
    35 days
    High
    Inventory
    NEXA inventory days
    41-42 days
    High
    Breakeven
    JLR Nagpur breakeven
    Year after operational
    High
    Market Share
    Maruti ARENA market share (Kerala)
    24%
    High
    Market Share
    Maruti NEXA market share (Kerala)
    21-22%
    High
    Market Share
    Maruti ARENA market share (Tamil Nadu)
    11.5-12%
    High
    Market Share
    Maruti NEXA market share (Tamil Nadu)
    21%
    High
    Market Share
    Service market share (Kerala)
    31-32%
    High
    Market Share
    Body shop market share (Kerala)
    35-36%
    High

    Completion of divestment of Piaggio and Honda businesses

    July
    CurrentApproved by Board, pending completion
    TargetTransaction completed

    Why it matters

    Frees up ₹70 crores for core business expansion and acquisitions, optimizing resource allocation.

    I am pleased to share that the Board of Directors has approved the divestment of both these entities for total consideration of Rs. 70 crores. We anticipate the transaction will be completed by July.

    How to verify

    capital_allocation.m_and_a[type='divestment'].status

    Risks & concerns

    3
    RiskSeverity

    Subdued retail demand and macroeconomic headwinds

    FY25 was challenging, with entry-level and small car segments particularly affected by high inflation and weak festive season, impacting overall performance.Management acknowledged

    high

    Elevated inventory levels and high discounts

    Inventory build-up in Q2 & Q3 FY25 led to pressure on working capital and higher interest costs, necessitating strategic discounting, though levels were brought down by year-end.Management acknowledged

    high

    Service business headwinds

    Service business faced headwinds in H1 FY25 due to internal factors (manpower, underperforming workshops) and the impact of new car sales slowdown on insurance coverage ratio, though marginal recovery was seen in H2.Management acknowledged

    medium

    Q&A highlights

    8

    “That on a long-term basis continues to be the same. As we said earlier, this year was a flip. And there is no change as far as the long-term strategy of the organization in terms of growth as well as the growth strategies continues to be the same.”

    Reaffirms the company's long-term 15% growth target despite FY25 challenges, indicating confidence in strategic direction and the resilience of the service business.

    asked by Preet (InCred AMC)

    3 min read6 chapters

    Detailed Narrative

    01

    Strategic Divestment and Resource Optimization

    Popular Vehicles announced the divestment of two non-core subsidiaries, Kuttukaran Green Private Limited (Piaggio business) and Vision Motors Private Limited (Honda business), for a total consideration of ₹70 crores. This strategic move, expected to be completed by July 2025, aims to optimize resource allocation. The proceeds will be redirected to accelerate the growth of the core business, with a particular focus on expanding the network outside Kerala, aligning with the goal of reducing Kerala's contribution to below 50%.

    02

    Challenging FY25 Performance and Inventory Management

    FY25 proved challenging for Popular Vehicles, with subdued retail demand, particularly in entry-level and small car segments. This led to elevated inventory levels in Q2 and Q3, impacting working capital and necessitating higher discounts. Consequently, the company reported a net loss of ₹10.5 crores for FY25, a significant drop from a PAT of ₹76 crores in FY24, and EBITDA declined by 38% to ₹175 crores. In response, management curtailed inventory offtake and implemented aggressive retail initiatives, successfully bringing inventory levels back to March '24 levels by the end of FY25.

    03

    Network Expansion and New Geographies

    The company is actively expanding its footprint with new OEM partners and in new geographies. With Ather, the company entered Maharashtra, planning two outlets in Nagpur and one each in Chandrapur and Chhatrapati Sambhaji Nagar, expected to commence operations in Q2 FY26. For Maruti, a new 3S facility in Avalahalli, Bangalore, was launched with an investment of ₹9 crores. Additionally, a state-of-the-art JLR 3S facility is planned for Hingna, Nagpur, with an investment of ₹12.5 crores, expected to be operational by H2 FY26 and breakeven in FY27.

    04

    Operational Efficiency and Profitability Initiatives

    To improve profitability, Popular Vehicles engaged Accenture for a deep dive into its transformation journey. Key focus areas include increasing sales manpower productivity, targeting an additional car per salesperson per month, which is expected to generate an incremental volume of 3,000 cars and an annual finance income gain of ₹3-4 crores. On the service front, average revenue per car is rising, expected to add ₹4 crores this year, and a one-time📎 manpower correction measure is projected to deliver an annualized benefit of ₹7 crores in FY26.

    05

    Segmental Performance and Outlook

    In FY25, new vehicle sales volumes declined by 5.5%, though average selling price increased by 2.9% to ₹9.15 lakh due to a higher mix of premium vehicles. The service and repair business saw a slight volume decline of 1.1% but income grew by 3.3% due to higher ASP. The company aims to restore its EBITDA margin to 5.1% in FY26, from 3.2% in FY25, driven by reduced discounts, operational efficiencies, and growth in high-margin service and EV segments. EV margins for Ather are expected to grow beyond 5% in the near future.

    06

    Market Share and Inventory Targets

    The company provided specific market share data for Kerala and Tamil Nadu, with ARENA market share at 24% in Kerala and 11.5-12% in Tamil Nadu, and NEXA at 21-22% in Kerala and 21% in Tamil Nadu. Service market share in Kerala stands at 31-32%, and body shop market share at 35-36%. Inventory days are targeted to be reduced to 35 days for ARENA and 41-42 days for NEXA by June 2025, reflecting a continued focus on tighter working capital management.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.