Ecos (India) Mobility & Hospitality IPO Review 2024: GMP, Subscription Status, Risks & Investment Analysis

The IPO (initial public offering) of Ecos (India) Mobility & Hospitality Ltd (Eco Mobility) commences on August 28 and concludes on August 30, 2024. This issue is purely an offer for sale (OFS), which means that the company will not receive any proceeds from the sale. Instead, all proceeds from the offer will go directly to the selling shareholders, distributed in proportion to the shares each has sold as part of the offer.

The offering, carrying a hefty Grey Market Premium (GMP) of 58%, has received a strong subscription response. However, investors need a clear understanding of both potential rewards and risks before subscribing. This IPO analysis provides a comprehensive review to help make an informed decision.

Eco Mobility IPO Details

• Issue Size: 601.20 crore
• OFS: 601.20 crore
• Price Range: 318 - 334
• Lot size: 44
• Minimum Investment Value: Rs 14,696
• Listing Date: September 04, 2024

Eco Mobility IPO Subscription Status

The IPO of Eco Mobility kicked off impressively, achieving full subscription on its first day of bidding. The offering was oversubscribed by 3.38 times with 4,26,12,196 shares bid against an available 1,26,00,000 shares. 

Non-institutional investors led the surge in subscriptions, subscribing 6.67 times their allotted quota. Retail investors also demonstrated significant interest, subscribing 3.88 times their reserved portion, whereas qualified institutional buyers subscribed just 0.04 times their reserved portion.

Overview of Eco Mobility

Eco Mobility is a leading provider in the chauffeured car rentals (CCR) and employee transportation services (ETS) sectors, boasting a varied fleet of over 12,000 vehicles, from economy cars to luxury coaches. It is recognised as India’s largest and most profitable chauffeur-driven mobility provider in terms of operating revenue and net profit for FY23. The firm boasts a widespread operational footprint, covering 109 cities across 21 states and 4 Union Territories in India.

Eco Mobility Key Strengths

• Exceptional Growth: Eco Mobility has demonstrated extraordinary growth, with its operating revenue and EBITDA witnessing a CAGR of 94% and 123%, respectively, from FY22 to FY24. Moreover, its net profit soared at an impressive CAGR of 152% during the same period.
• Industry-Leading Margins: Post-COVID, as offices reopened, Eco Mobility saw significant enhancements in its financial metrics. For FY24-FY25, its EBITDA margin averaged 16.4% - the highest in the industry.
• Asset-Light Model: Eco Mobility focuses on a capital-efficient, asset-light model, owning just 5.8% of its total fleet as of FY24, with the remainder managed through vendors. 
• Investor-Friendly Approach: In March 2024, Eco Mobility instituted a dividend policy and distributed a substantial dividend of 127.50% for FY24, underscoring its commitment to shareholder returns.

Eco Mobility Risk Factors

• Client Concentration Risks: Eco Mobility's top 10 customers account for up to 35% of total revenue for each of the past three fiscal years. Losing any major customer or a reduction in business from these key clients could affect its financial performance.
• Competitive Industry Landscape: The car rental industry is intensely competitive, involving both organized and unorganized sector players.
• Legal Risks: Eco Mobility faces outstanding litigations amounting to Rs 7.8 crore, and the promoters are involved in litigations totalling Rs 2 crore. 

Eco Mobility Valuation & Recommendation

Eco Mobility stands out as the most profitable company in the chauffeur-driven corporate mobility sector across India. Post-COVID, it has displayed impressive growth in both revenue and earnings, backed by robust return metrics.

The industry is moving towards a higher adoption of organized players, anticipated to make up 30% of the market by CY25, an increase from 25% in CY23. Additionally, expansions into tier-II and III cities alongside enhanced airport connectivity open new avenues for shared mobility services. 

In terms of valuation, the IPO is reasonably priced with a P/E ratio of 32x FY24 earnings, aligning with peers despite possessing superior financials. Given the solid demand outlook, impressive financials, expansion into premium offerings and fair valuation, investors may consider subscribing to the IPO from a medium-to-long term perspective.

For a deeper dive into this IPO, explore: IPO Corner on Liquide

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