New Delhi: Motorbike dealer Rahul Sawhney woke up on 29 August and added an evil eye to his Instagram bio. He’s worried about the world’s nazar after his company’s small IPO unexpectedly received bids worth Rs 4,800 crore.
Sawhney’s sudden stock success made headlines earlier this week when his company — Sawhney Automobiles, registered under Resourceful Automobile — went in for a modest Initial Public Offering (IPO) of Rs 12 crore, but instead received bids 400 times that amount, totalling Rs 4,800 crore by the time the issue closed.
“We’re also shocked — we never expected this!” laughed Sawhney in between fielding incessant phone calls, with a box of kaju katli on his desk to celebrate the IPO. “I was very nervous before the IPO. I’m even more nervous now!”
Sawhney Automobiles seems like a small fish that’s accidentally leapt into a giant pond and isn’t sure what to do. The staff is all surprised at the response to their modest IPO, and nervous about the attention. There’s been no change in the number of customers walking into their main showroom in Dwarka — but going viral brought a media storm to their doorstep.
Now, the firm’s eight employees are feeling the pressure. They have a mountain of paperwork to tackle — and a lot of reading to do.
“We’re not suddenly loaded with cash. What we suddenly have is a lot of paperwork”.
– Sam Patel, Chief Accountant, Sawhney Automobiles
“We thought we should just try an IPO and bring in some public investment,” said Sawhney, who founded the company in 2018 and is the Chairman and Managing Director of Resourceful Automobile. “To our luck, it went well. And now it’s not just Delhi, all of India knows about us.”
The bike dealership
Sawhney Automobiles became part of the Yamaha Blue Square network in 2022, making them the only bike showroom in North India that can sell and service Yamaha bikes exclusively. Their showroom is the first across North India to acquire Yamaha’s latest offerings.
It’s why there are more Yamaha employees than Sawhney’s at the dealership’s headquarters in Dwarka — from cleaners to servicemen. The other regulars are representatives of Bajaj, Tata Capital, and HDFC, to help customers take out bike loans.
Set up by bike aficionado Sawhney, the company’s Executive Director is his wife Megha Chawla and Non-Executive director is his mother Bindu Sawhney. Sawhney was so nervous about the IPO that he didn’t tell his mother about it — she found out once the news went viral, from a WhatsApp group with her neighbours she goes on walks with.
“I didn’t even tell my friends about it. The idea was to try it after our financial advisors suggested it. Anyway we’ve given only about 30 per cent of stocks publicly, we’re still keeping the majority with us,” said Sawhney.
The secrecy was an apprehensive defence mechanism to avoid awkward conversations if the IPO didn’t go well. They didn’t market the IPO — though they followed regular marketing tactics, like ads in several Dwarka bus stands — and nor did their merchant bank Swastika Investmart. It’s why the attention their IPO received has taken everybody aback.
“You can’t help it when things go viral!” said company secretary Drishti, who’s been delegated to field media over the past few days. She pointed out that the showroom doesn’t just deal with motorbikes — they deal with premium and sports bikes. The models include the Yamaha R15, R3, and MT-15 — ranging from Rs 2 lakh to around Rs 6 lakh.
Sawhney and the company’s chief accountant, Sam Patel, were quick to caution that even though their IPO raised Rs 4,800 crore, they can only keep the Rs 12 crore they were looking to raise.
“We’re not suddenly loaded with cash,” said Patel. “What we suddenly have is a lot of paperwork”.
But they had no explanation as to how this happened, and seemed as confused as the rest of the media is. The list of shareholders are all regular people from cities like Mumbai, Delhi, Gurugram, and Jaipur.
“I have no answers. But with this opportunity, I want to increase our operations and expand to add two more showrooms besides our offices in Dwarka and Mahavir Enclave,” said Sawhney, indicating that one possible location could be West Delh’s Uttam Nagar.
“The interest will lead us to more revenue. And now, all of India’s eyes are on me — so it has to happen!”
An unusual IPO
Sawhney decided to go for an IPO because of a recent market trend: IPOs for small and medium enterprises (SME) are currently at an all-time high.
The SME IPO segment was launched in 2012 but has garnered “unprecedented attention” in 2024, according to Moneycontrol. Some companies saw subscriptions exceeding 1,000 times the original issue, making Resourceful Automobile’s 400 times seem paltry.
The unusual IPO says more about the market than the automobile firm, according to analysts. The enthusiasm around SME IPOs is due to a recency bias — which leads people to believe that if markets have risen recently, they’ll continue to do so.
Resourceful Automobile’s revenues grew from Rs 11 crore in 2020-21 to Rs 18.8 crore in 2022-23. As of 29 February, 2024, its revenue is Rs 16.5 crore. Similarly, profits also grew to Rs 1.5 crore in 2023-24.
We have nothing to hide, so it was important to be honest with all our risk disclosures. We didn’t want to hide anything from the public.
– Rahul Sawhney
But the company is also taking on debt, having increased its debt from Rs 2.7 crore in 2020-21 to Rs 9.9 crore in 2023-24. Some of the money raised through the IPO will be put toward clearing outstanding debt — an IPO is a way to raise funds without adding to debt.
And what makes this case particularly interesting is that Resourceful Automobile’s Draft Red Herring Prospectus (DRHP), submitted to the BSE on 29 December, 2023, discloses several risks to its business — 23 internal risks and 25 external risks. On 14 August, 2024, they filed their prospectus after BSE approved it. The issue then opened on 22 August and closed on 26 August.
“We have nothing to hide, so it was important to be honest with all our risk disclosures,” said Sawhney. “We didn’t want to hide anything from the public.”
He is not worried that he’s been too candid about the risks he’s disclosed. The risks include everything from potentially entering into business relationships where there are conflicts of interest, to having included inaccuracies in regulatory submissions to the Registrar of Companies. As far as Sawhney is concerned, he’s done his best by being upfront to potential investors.
“And after all this, the public still subscribed by 400 times. What can I say?” shrugged Sawhney. “I have no answers.”
Plan is to party
Sawhney’s phone has been ringing off the hook since his company went viral. He can’t count the number of times he’s corrected well-wishers that he doesn’t actually have Rs 4,800 crore.
To his nearly 40,000 Instagram followers, he’s only posted messages of gratitude. His wife, who’s also a makeup artist, has posted a string of images to her 70,000 followers, thanking their Guruji.
Neither he nor his wife have planned any big purchases to celebrate raising Rs 12 crore. Sawhney, whose first bike was a Suzuki Hayabusa, doesn’t need to buy any more motorbikes.
“We’re looking forward to expanding our business now,” he said, unable to wipe the grin off his face.
Sawhney couldn’t sleep the night of 26 August, when the issue closed. He didn’t sleep much the next night either, because he received a letter from SEBI on SME IPOs. He’s been trying to educate himself on the brand new world of SMEs on the stock exchange.
“Kisko neend aayega? (Who’ll be able to sleep?)” he asked.
But as of 29 August, Sawhney Automobiles is officially listed. Sawhney can’t explain why or how it’s happened, but it’s sinking in that his company is not only financially secure for the moment, but has just had a round of massive publicity for free. And Sawhney’s plan to celebrate?
“Party, of course. What else?” he laughed, before disappearing into his office for another call.
(Edited by Aamaan Alam Khan)