Financial Deep Dive
Popular Vehicles and Services Ltd (PVSL) has reported its strongest quarterly performance in 18 months, with the third quarter of fiscal year 2026 (Q3 FY'26) showing a significant turnaround. Consolidated total income surged by 30.9% year-on-year (YoY) to ₹1,791.8 crore, up from ₹1,368.6 crore in Q3 FY'25. This growth was largely propelled by a 44% YoY jump in new vehicle volumes to 16,023 units. The company also saw a healthy 16.8% increase in income quarter-on-quarter (QoQ) to ₹1,791.8 crore.
Profitability metrics showed substantial improvement. EBITDA more than doubled, rising 68.1% YoY to ₹58.2 crore, leading to an improved EBITDA margin of 3.3% in Q3 FY'26, compared to 2.5% in the same period last year. On an adjusted basis, EBITDA grew 78.6% YoY. Crucially, the company returned to profitability, reporting a Profit After Tax (PAT) of ₹0.7 crore for Q3 FY'26, a significant improvement from a loss of ₹9.8 crore in Q3 FY'25. While the 9-month period (9M FY'26) still shows a PAT loss of ₹7.5 crore against a profit of ₹3.3 crore in 9M FY'25, the Q3 performance signals a strong recovery trajectory.
Debt levels have risen to approximately ₹655 crore, primarily due to strategic acquisitions. The company expects this debt to remain stable or reduce, with working capital debt managed around ₹550 crore for the exit of FY'26.
Outlook & Strategy
Management is optimistic about the company's future, revising its full-year FY'26 growth expectation to mid-teens, with Q4 FY'26 projected to outperform Q3. The company is targeting an EBITDA margin of around 3.5% for the full fiscal year 2026.
The outlook for FY'27 is even more ambitious, with a target of high double-digit topline growth and a significant improvement in profitability, aiming for a 5% EBITDA margin. PAT is expected to recover to FY'24 levels.
This growth is underpinned by a strategic diversification across customers, geographies, and product offerings. Key initiatives include acquiring an Audi dealership in Telangana and Andhra Pradesh, marking entry into a new premium OEM relationship, and a BKT tire distributorship in Kerala and Karnataka. The launch of an e-commerce platform for spare parts, ZPAREX Digisolutions, also aims to tap into a high-margin segment. The service business, which saw a slight dip YoY in Q3, is expected to rebound with double-digit volume growth from FY'27.
Investor Risks & Governance
Despite the strong Q3 results, investors have raised specific concerns. A notable point is that employee costs have consistently exceeded the company's EBITDA in recent quarters. This raises questions about the efficiency of operations and the potential impact on shareholder returns. Additionally, the integration of recent acquisitions is expected to exert near-term pressure on margins, though full benefits are anticipated from fiscal year 2027 onwards.
The service business, while showing resilience, experienced a marginal 1% YoY increase in topline in Q3, indicating a lag effect from past new vehicle sales trends. A temporary disruption in the luxury vehicle segment (JLR) due to a cyberattack at an OEM partner also occurred, though operations have since normalized. Furthermore, supply shortages for certain popular Maruti models are affecting sales in the current quarter.
Peer Comparison
Popular Vehicles operates in the highly competitive Indian automotive retail sector. Competitors like Landmark Cars and other regional dealership groups are also navigating a period of demand recovery post-pandemic and in response to economic reforms. While specific margin comparisons require granular data, PVSL's Q3 EBITDA margin of 3.3% is a significant improvement, indicating better operational leverage as volumes grow. The broader sector benefits from government initiatives like GST reforms and infrastructure development, creating tailwinds for all major players. However, the thin margins inherent in auto retail mean that scale, diversification, and operational efficiency, as PVSL is pursuing, are crucial for sustained profitability and achieving higher margin targets like the 5% set for FY'27.