Popular Vehicles & Services: Navigating Growth and Strategic Shifts in Q3 FY26

Popular Vehicles & Services Limited, a prominent integrated automotive dealership player in India, has reported a robust performance for Q3 FY26, marking a significant turnaround after nearly 1.5 years of subdued market conditions. The company's total income for the quarter stood at Rs. 1,791.8 crore, reflecting a strong 30.9% year-on-year growth. Despite facing some near-term margin pressures, the company's Adjusted EBITDA reached Rs. 61.7 crore, growing by 78.6% year-on-year, with margins at 3.4%. This performance underscores a clear inflection point, driven by improved customer sentiment and a broad-based recovery in demand across key segments, particularly following recent GST reforms.

The quarter witnessed exceptional growth in new vehicle sales volumes, which surged by 43.7% year-on-year to 16,023 units. This was primarily fueled by strong demand in the entry-level passenger vehicle segment, which grew over 35% year-on-year, and the premium vehicle segment, which saw a 30% year-on-year increase. The commercial vehicle segment also showed early signs of a turnaround, with volumes growing by over 52% year-on-year. The electric two-wheeler segment continued its rapid penetration, with Ather gaining significant market share, contributing to strong volume and revenue growth for the company. While the service business experienced some softness due to the lag effect of lower new vehicle sales in prior periods, its topline still increased marginally by 1% year-on-year, supported by higher-value services like collision and repairs.

Strategic Expansion and Diversification

Popular Vehicles & Services remains committed to its strategy of diversification across customers, geographies, and product applications. A key highlight of the quarter was the successful acquisition of an existing Audi dealership in Telangana and Andhra Pradesh, marking the beginning of a new OEM relationship with a leading premium luxury automobile brand. This move is strategic, as the luxury and ultra-luxury segment in India is considered significantly under-penetrated, offering compelling long-term opportunities. The company also entered into an agreement to become the authorized distributor for Balkrishna Industries Limited (BKT) in Kerala and Karnataka, covering BKT's two-wheeler and PCR segments, further expanding its spare parts business portfolio.

To bolster its omnichannel presence, Popular Vehicles & Services established ZPAREX Digisolutions Private Limited, an e-commerce platform for spare parts and accessories, as a step-down subsidiary. These initiatives, coupled with ongoing organic network expansion, are expected to drive strong growth momentum. The company's rolling three-month average inventory currently stands at approximately 22 days, with new vehicle inventory at 19 days, reflecting improved supply-demand alignment and disciplined working capital management.

Operational Efficiency and Future Outlook

Despite the positive demand trends, the company acknowledged some operational challenges. Employee costs increased, primarily due to the integration of Telangana and Punjab operations. Gross margins saw a slight dip from 14% to 12.7% quarter-on-quarter, mainly due to a shift in the revenue mix towards smaller, lower-margin vehicles following GST rationalization. However, management is proactively addressing these by focusing on higher-margin services like collision and repairs and implementing operational efficiencies. The planned centralization of back-office operations is expected to yield annualized savings of approximately Rs. 1.5 crore and improve inquiry-to-retail conversion.

Looking ahead, Popular Vehicles & Services expects Q4 FY26 to outperform Q3 FY26, leading to a mid-teens growth for FY26 compared to FY25. For FY27, the management projects high double-digit topline growth, with EBITDA margins normalizing to the 5% range and PAT approaching FY24 levels. This optimistic outlook is underpinned by improving demand trends, continued network expansion, lower discounting, and upcoming new model launches from OEMs. The company's strategic focus on profitable growth, enhancing return ratios, and creating long-term value for stakeholders positions it well for sustained performance in the coming quarters.