Home
>
Articles
>
CarTrade IPO: CarTrade IPO Allotment Date, Price Band & Review

CarTrade IPO: CarTrade IPO Allotment Date, Price Band & Review

Last updated: 07 Aug, 2021 | 09:43 am

CarTrade IPO: CarTrade IPO Allotment Date, Price Band & Review

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

IPO Objective

The money raised from the IPO will be utilized:

  • to carry out an offer for sale.
  • to achieve the benefits of listing the equity shares on the stock exchanges.

About CarTrade Tech

  • The company was incorporated in 2000 as a multi-channel auto platform provider company.
  • The company operates various brands such as CarWale, CarTrade, Adroit Auto, BikeWale, CarTradeExchange, Shriram Automall, and AutoBiz.
  • The platform connects used and new automobile customers, vehicle OEMs, vehicle dealers, and other businesses to sell and buy different types of vehicles.
  • The company offers a variety of solutions across automotive transactions for buying, selling, financing, marketing, and other activities.
  • For FY20, they are the only profitable digital auto platform among the key competitors.
  • For the quarter ending June, the company's consumer platforms, CarTrade, CarWale, and BikeWale, collectively had an average of 27.11 million unique visitors per month, with 88.14% being organic visitors.

CarTrade segments:

Below are the services offered by the company:

  • CarWale and CarTrade - Under this, car shoppers can visit the platforms to research and connect with dealers, OEMs, and other partners. Using these platforms, they can buy and sell cars from the large variety of used and new cars offered. The platform has also tied-up with automotive and financing companies to offer their services and products on these two platforms.
  • Bikewale - Customers looking to sell and buy two-wheelers from the large variety of new and used two-wheelers come under this section.
  • Shriram Automall - Under this service, the company facilitates sales of two-wheelers, pre-owned cars, commercial vehicles, three-wheelers, and farm and construction equipment.
  • CarTrade Exchange - It is an online auction platform and a used vehicle Enterprise Resource Planning (ERP) tool. It is used by business sellers, dealers, consumers, and fleet owners to sell vehicles to automotive dealers and fleet owners.
  • Adroit Auto - It is a vehicle inspection and valuation service used by banks, insurance companies, and other financial institutions.
  • AutoBiz - This segment of business provides new car dealers a CRM solution to manage their customers in a better and efficient manner.

Financials

  • The revenue for the last financial year dropped by 16%.
  • Net profit increased significantly in the FY21 because of deferred taxes and not because of business growth.
  • The EBITDA has grown at a decent CAGR of 9.5%.
  • Operational metrics largely have improved year over year from FY19 to FY21 despite lockdowns for the most part of FY21. 
  • Number of vehicles sold in auctions were lesser in FY21 than FY20.
  • Percentage of vehicles sold in auctions vs listed is reducing year over year.

Listed Peers

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)

  • CarWale had the highest search volumes but searches for competitor Cars24 have picked up since May-20.
  • In terms of traditional financial numbers, CarTrade has the best numbers among the bunch and is the only profitable player in the industry. 
  • The only part where CarTrade lacks is revenue. It has the 2nd lowest revenue amongst all 5 players.
  • A big difference between CarTrade and its peers is that CarTrade is seeing good organic visitors on its platforms but its peers, especially Cars24, Cardekho, Droom spent Rs 141 cr, Rs 146 cr and Rs 197 cr respectively on advertising. CarTrade spent Rs 24 cr only.

USP

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.

Growth Potential

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.

Risk

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.

We are a SEBI registered investement advisor