IPO of Delimobil Holding S.A.: A Russian-style Carsharing
Short-term car rental has become very popular in cosmopolitan centres all over the world, especially with the youngsters, who often need cars just for several hours. Since the cars are located in parking lots all over a city, it became much easier to find one within a walking distance.
Such services are an excellent alternative to taxis for those clients, who can and want to drive themselves. In most cases, carsharing services are available through mobile applications.
Delimobil Holding S.A., one of the most popular carsharing companies in Russia, is going to have an IPO in the US at the NYSE. Its shares will start trading the next day after the IPO, the “DMOB” ticker symbol.
The IPO date was postponed, that’s why the company will go public no sooner than early January. So far, let’s dig deeper into the company’s business and try to find out if Delimobil stands a chance to attract a lot of investors.
Delimobil Holding S.A. was established in 2015 with a headquarters in Luxembourg. The company’s founder/CEO is Vincenzo Trani. Delimobil employs over 1,000 people (more than half of them are involved in car service and maintenance).
The company offers its services in 11 cities in Russia, including Moscow and Saint Petersburg. According to Tiburon Brand Health Research, the “Delimobil” brand became more recognised in Russia at the end of 2020.
According to the Moscow Department of Transport, Delimobil Holding covers 44% of all carsharing travels. Bank of America reports that the company is leading the industry, forcing its key competition, Yandex.Drive, to the background.
Over 7 million people subscribed to the company’s service; this number skyrocketed by 86% in the previous year. The issuer’s car fleet includes comfort class cars and consists of over 18 thousand vehicles. The holding also offers long-term rent services under the Anytime Prime brand with over 600 cars.
Delimobil Holding services are extremely popular with the youngsters as the average age of the company’s clients is 19. To maintain internal accounting and improve its business processes, the company uses its proprietary platform, Smart Mobility Management (SMM).
During the investment rounds, the issuer raised about $300 million, including the national investment bank VTB Capital (a bit over 13%).
Now let’s take a closer look at the company’s target market, which, in my opinion, will be a growth point of Delimobil Holding business.
According to Frost & Sullivan, the global carsharing market in 2020 added 4% and even the pandemic couldn’t prevent it from expanding. The same research says that the global shared mobility (taxi and auto rental) market in 2020 was $110 billion.
The market is expected to add 7.8% every year until 2025 and reach $160 billion by that time. The key growth driver is the growth in the number of clients among the youngsters.
The company’s key competitors are:
Delimobil Holding is going public being loss-making, that’s why we’ll focus on analysing its revenue. In 2020, the company’s sales were 6.45 billion rubles, a 28.74% increase relative to 2019.
According to the F-1 report, in the first 2 quarters of 2021, Delimobil’s revenue was 4.93 billion rubles, a 120.09% increase if compared with the same period of 2020. As we can see, the company’s business is growing much faster than the market itself.
In the last 12 calendar month, the revenue was 9.13 billion rubles. If the current development pace continues, at the year-end of 2021, this sum may reach 14.2 billion rubles.
As for the net loss, it dropped by 53.03%, down to 1.07 billion rubles. Cash and cash equivalents on the company’s balance sheet are 4.30 billion rubles, while its total liabilities are 22.10 billion.
Now let’s highlight the strong and weak sides of Delimobil Holding. I believe the advantages of investing in the company’s shares are:
- The target market volume.
- Brand awareness.
- Sound management.
- A lot of youngsters among clients.
- Business growth rate.
Risk factors of investing in shares are the following:
- The company is loss-making and doesn’t pay dividends.
- Strong competition.
- Business is not transnational, it is limited by the Russian jurisdiction.
At first, Delimobil Holding planned to go public back in November, but later the management decided to have an IPO early in 2022. The underwriters of the IPO are Sberbank CIB (UK) Limited, Banco Santander, S.A., Citigroup Global Markets Inc., VTB Capital plc, and BofA Securities, Inc.
During the IPO, the company is planning to sell 20 million common shares at the price of $10-12 per share. The IPO volume is expected to be $220 million and the company’s capitalization may be $836 million. Delimobil Holding will be the world’s first public carsharing company.
To assess loss-making companies, we use a multiplier, the Price-to-Sales ratio (P/S ratio). A P/S value for the technological sector with such a rapidly-growing target market may be up to 10 during the lock-up period. The company is filing for an IPO with P/S equal to 6.76. As a result, the upside for shares may be up to 47.93% (10/6.76*100%).
With all that said, I would consider this investment a venture one. In the case of favourable market sentiment, there is a high probability of an “explosion” in the company’s capitalization. That’s why I would recommend this company for short-term speculative investments.
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