Detailed Narrative
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%.
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.
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.
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.
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.
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.