BikeWo GreenTech Limited has made a lackluster debut on the NSE SME, listing its shares at ₹45, which represents a significant 27.4% discount to the IPO issue price of ₹62 per share. This weak market reception contrasts sharply with the overwhelming subscription interest the IPO generated, being oversubscribed 39.83 times during its subscription period from September 20 to September 24, 2024.

Despite the robust subscription figures, the shares opened lower than expected, reflecting market skepticism towards the electric vehicle sector, particularly for newer entrants like BikeWo GreenTech. The ₹24.09 crore IPO consisted of a fresh issue of 38.86 lakh shares, and the allotment was finalized on September 25, 2024. Investors looking to engage with the stock were required to adhere to a minimum lot size of 2,000 shares, necessitating an investment of at least ₹124,000.

Business Overview

BikeWo GreenTech operates primarily as an electric two-wheeler retailer in India, expanding its footprint in the burgeoning electric vehicle market. However, the company has also engaged in the business of buying and selling used four-wheelers from authorized dealers, positioning itself as a dual player in both new and pre-owned vehicle markets.

The subscription details are noteworthy, as the IPO received significant backing, reflecting confidence in the company’s business model. Nevertheless, the actual market performance raises questions about investor sentiment toward the electric vehicle sector amidst rising competition and regulatory challenges.

IPO Objectives and Use of Proceeds

The proceeds from the IPO are earmarked for several strategic initiatives:

₹600.00 lakhs for funding the purchase of electric two-wheeler vehicles for supply to new and existing dealers.

₹623.38 lakhs for capital expenditures aimed at establishing eleven dealership stores across various states in India.

₹350.00 lakhs for the prepayment or repayment of outstanding borrowings.

General corporate purposes.

Financial Performance

From a financial standpoint, BikeWo GreenTech has shown a steady increase in revenues over the fiscal years 2022 to 2024:

Revenues from Operations: ₹2,514.21 lakhs (FY24), ₹2,061.86 lakhs (FY23), ₹1,391.71 lakhs (FY22)

EBITDA: ₹282.29 lakhs (FY24), ₹67.14 lakhs (FY23), ₹100.38 lakhs (FY22)

Profit after Tax: ₹167.21 lakhs (FY24), ₹9.80 lakhs (FY23), ₹15.19 lakhs (FY22)

The pre-issue EPS is ₹2.51, and the post-issue EPS is ₹1.28, indicating a decline in profitability per share post-IPO. The pre-issue P/E ratio stands at 24.70x, while the post-issue ratio escalates to 48.43x, suggesting a premium valuation that may have deterred investors during market fluctuations.

The company’s ROCE for FY24 is reported at 10.87%, and the ROE stands at 13.94%, indicating a reasonable return on capital but raising concerns about profitability post-IPO due to the higher valuation metrics.

Market Sentiment

The Grey Market Premium (GMP) for BikeWo GreenTech has been reported at ₹0, which indicates no expected listing gains. This lack of enthusiasm in the grey market reflects broader market sentiment that may not favor new entrants without a solid track record in the electric vehicle space.

Given the current market performance and the financial metrics of BikeWo GreenTech, we recommend investors to avoid the BikeWo GreenTech Limited IPO for listing gains or long-term investment purposes. The combination of high pre-issue P/E ratios and a weak debut suggests caution.

Conclusion

As the electric vehicle market evolves, investors should remain informed about the performance of companies like BikeWo GreenTech. 

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