Last updated: 07 Aug, 2021 | 09:43 am
CarTrade Tech IPO opens for subscription on 9th August. The company is looking to raise Rs 2998.51 crore through the public issue. Here are the details:
CarTrade Tech IPO Date: August 9th - 11th
CarTrade Tech IPO Price band: Rs 1585 - 1618 per share
Issue Size: Rs 2998.51 crore (offer for sale by promoters and shareholders worth Rs 2998.51 crore.)
Post Issue Implied Market Cap: ₹ 7,265 – 7,416 Cr
Reservation: QIB 50%, Retail - 35%, NII 15%.
Bid lot: 9 shares, and in multiples of 9 shares
The money raised from the IPO will be utilized:
About CarTrade Tech
Below are the services offered by the company:
Operational metrics largely have improved year over year from FY19 to FY21 despite lockdowns for the most part of FY21.
The automotive industry in India is highly competitive. The company has a number of competitors, but none of them are listed. The key competitors include brands such as Cars24, CarDekho and BikeDekho, Droom, and Mahindra First Choice Wheels.
Google trends Search volumes (past 12 months)
Synergistic Ecosystem - The company has a presence across vehicle types and also many value-added services. The company has a strong presence both online and offline channels, and hence they are able to give the best price to the users. The data used through one platform is used for the benefit of other platforms.
Good customer experience - All the brands under CarTrade are trusted brands for automotive sellers and buyers. Some of them are number one when it comes to online search popularity. The company offers unbiased transparency and intuitive search results.
Use of technology - As mentioned above, the company has a large data set on vehicles in India. As per their websites, the company handles approximately 1.76 million user sessions per day. The company is using this data to provide pricing tools, product reviews, and market insights as well as reports to consumers, dealers, financial institutions, etc.
Profitable business model - The company has 114 auto-malls, a large majority of which are on rent or lease. Their investments in technology have made their platforms scalable in a highly capital-efficient manner. It has allowed them to use cash on their balance sheet for acquisitions which have formed important parts of their strategy in the past.
The growth of the automotive sector in India - In 2020, India was the 5th largest car market, and it is expected to become 3rd in terms of volume by 2025. So there is a lot of growth potential in the market itself. The company expects to increase its advertisement income and leverage the market. The number of used car dealers subscribing to paid service on online automotive portals is expected to increase from 4000 (in 2020) to around 10,000 by FY25.
Use of digital ecosystem - The company plans to leverage the leading brands to provide services across different vehicle categories including new and used two-wheelers, new and used cars, etc using the digital ecosystem.
Monetize value Added services - The company offers a number of value-added services to its customers. The company plans to increase monetization opportunities by introducing complementary, value-added products and services to improve the experience of selling, buying, and owning vehicles.
Technology - The company plans to improve its technology (AI and machine learning capabilities) by investing in it. It will help them get more relevant and timely information to their customers and enhance user experience.
The Covid impact - There is significant uncertainty regarding the duration and long-term impact of the pandemic. Hence, the company's business, and if it will be able to maintain cash flows is also uncertain.
Dependency on technology platforms - The company's core business is the sale and purchase of vehicles through different online channels. A disruption or failure of technology platforms due to software or hardware malfunctions, system implementations or upgrades, computer viruses, etc could lead to extended interruptions of operations. It leads to a corresponding loss of revenue and profits.
Organic ranking dependency - As mentioned at the start, the company generates huge traffic on its platform through organic search results. This scenario is not permanent, and the company may lose its ranking. It will reduce traffic to their website and hence the revenue and the profits.
CarTrade Tech IPO: INDmoney review
While CarTrade’s topline got impacted and fell by 16% in FY21, the bottomline got boosted mainly due to a deferred tax credit amounting to Rs 64 crore. Excluding the impact of this tax credit the bottom line has grown by a steady 18% over the last three years. Notably, it is the only profitable company among multi-channel auto platform providers such as Cars24, Cardekho, Mahindra First Choice and Droom.
The company also has better margins and return ratios as compared to these peers. At the higher end of the price band, CarTrade IPO is priced at around 73 times FY21 EPS (on a post issue basis). In case we account for the tax credits and consider the adjusted earnings, then the issue is priced aggressively at 210 times FY21 earnings per share. Good businesses are getting priced very expensively this IPO season, and CarTrade is no exception. Given a fancy for digital business amid the pandemic, the issue could still see strong traction.
Given the company’s unique positioning in the vehicle platform space,asset-light and scalable business model, positive sentiment due to marquee investors, investors who wish to take exposure to an under-penetrated new-age multi-channel auto platform business could consider subscribing to the issue.