Popular Vehicles & Services: Navigating Growth and Strategic Shifts in Q2 & H1 FY26

Popular Vehicles & Services Limited, a prominent player in India's automotive dealership sector, recently unveiled its performance for the second quarter and first half of Fiscal Year 2026. The period, marked by strategic acquisitions, divestments, and an evolving market landscape, showcased the company's proactive approach to growth and portfolio optimization. While the headline financials reflected some pressures, particularly on profitability, the underlying operational momentum and strategic initiatives paint a picture of a company poised for future expansion.

For Q2 FY26, the company reported a total income of INR1,534.6 crores, demonstrating a robust 16.6% quarter-on-quarter increase from INR1,316 crores in Q1 FY26, and a 1.1% year-on-year growth from INR1,518.3 crores in Q2 FY25. This growth was primarily driven by higher volume momentum, especially during the festive season. However, EBITDA for Q2 FY26 stood at INR49.4 crores, a 16.5% year-on-year decrease from INR59.2 crores in Q2 FY25, with the EBITDA margin at 3.2%. The Profit After Tax for Q2 FY26 was INR0.6 crores, a significant improvement from a loss of INR8.8 crores in Q1 FY26, but a 92.5% decrease from INR7.6 crores in Q2 FY25. For the first half of FY26, total income reached INR2,850.5 crores, up 1.2% YoY, while EBITDA was INR87.7 crores, down 21.1% YoY, resulting in a H1 FY26 loss of INR8.2 crores.

Strategic Expansion and Portfolio Optimization

The reporting period was particularly eventful for Popular Vehicles & Services Limited, marked by significant strategic maneuvers. The company successfully completed the acquisition of the authorized Maruti Suzuki dealership of R.K.S Motors Private Limited in Telangana. This substantial acquisition, valued at approximately INR90 crores (excluding inventory), includes all operational assets and has led to the onboarding of 1,039 employees. This move significantly strengthens the company's geographic footprint beyond Kerala, building on its established presence in Karnataka and Tamil Nadu, and positions it for sustainable growth in the fast-growing southern market. The acquired dealership operates across 19 locations, encompassing 27 authorized touchpoints for Arena, NEXA, True Value, service, bodyshop, and commercial driving schools.

In another strategic acquisition, the company took over the BharatBenz dealership of Globe CV Private Limited in Punjab through a slump sale for approximately INR12 crores. This acquisition makes Prabal Motors the exclusive dealer partner for BharatBenz in Punjab, enhancing sales and service reach in the region. These acquisitions align with the company's strategic objective to diversify its geographic presence and reduce Kerala's revenue contribution to below 50% by FY '27.

Conversely, the company also undertook a significant portfolio optimization by divesting its Honda (Vision Motors Pvt. Ltd.) and Piaggio (Kuttukaran Green Pvt Ltd) businesses. This divestment, which resulted in an exceptional gain of INR15.3 crores, allows Popular Vehicles & Services Limited to sharpen its focus and reallocate management bandwidth towards higher-growth and higher-synergy businesses. This disciplined approach to capital allocation and portfolio management underscores the company's commitment to long-term value creation.

Operational Highlights and Future Outlook

Operationally, Q2 FY26 was a strong quarter in terms of volumes, marking the best performance in the last 6-8 quarters. This was achieved despite the absence of Honda volumes for one month and the impact of GST rate discussions in mid-August, which led to customers postponing purchases. Sequentially, both volumes and revenue improved, reflecting underlying demand momentum. The Arena portfolio saw a 40% QoQ growth, while NEXA grew by 77% QoQ, indicating renewed traction in these segments. The luxury segment also continued its upward trend.

To enhance customer reach and service convenience, the company launched an e-commerce platform for spare parts and accessories under ZPAREX Digisolutions Private Limited. This initiative aims to leverage the multi-brand portfolio and build a stable, recurring revenue stream with higher EBITDA margins over the next 3-5 years, capitalizing on the shift towards digital purchasing behavior. Additionally, the company received a Letter of Intent (LOI) to establish new NEXA workshops in Perumbavoor and Thodupuzha, further strengthening its service network.

Management acknowledged the impact of a GST cess provision of INR3.6 crores, which affected margins, and is awaiting clarity from the government. Despite this, the company's credit ratings saw an upgrade for its subsidiary, Popular Autoworks Private Limited, from CARE BBB+ to CARE A-, and CRISIL reaffirmed its A/Stable long-term rating. This reflects confidence in the company's financial health and operational stability.

Looking ahead, Popular Vehicles & Services Limited anticipates a sustained recovery in demand across key segments, driven by the momentum from recent acquisitions, continued network expansion, and disciplined operational execution. The company expects Q3 FY26 to reflect stronger volume momentum and projects a double-digit volume growth for FY26, combining organic and inorganic efforts. Management also guided for an improvement in EBITDA margins to 4.2-4.3% from the current 3.5% and expects to surpass the INR70-80 crore PAT level by FY27. The company remains well-positioned to deliver stronger performance in the coming quarters and close FY26 on a positive growth trajectory, reinforcing its commitment to strategic clarity and disciplined execution.