CarTrade Set to Acquire OLX Auto for ₹537 Crore

CarTrade Tech Limited, a leading online platform for buying and selling used vehicles, has announced the acquisition of Sobek Auto India, the unit which holds OLX India’s auto sales division. 

The deal, valued at ₹537.43 crore, strengthens CarTrade's position as a one-stop destination for all vehicle-related needs, from buying and selling vehicles to providing financing, insurance, and inspection services. CarTrade will acquire 100% of OLX Autos. 

CarTrade and OLX: Business Details

Both CarTrade and OLX Auto have similar operations. They operate an online marketplace facilitating the buying and selling of new and used vehicles. 

A core component of their service includes the provision of financing and insurance facilities, offering an integrated platform for users. They also prioritize vehicle quality and reliability, offering thorough car inspection services for all vehicles listed on their platform. 

Additionally, they provide vehicle pricing and valuation services, assisting users in identifying fair market values of used vehicles.

CarTrade's Acquisition of OLX: Key Insights

The acquisition of OLX Autos comes at a time of increased competition in the used car space through startups like Spinny. Spinny, which became a Unicorn in 2021, is also an online marketplace for buying and selling used cars, and reported revenues of about Rs 3,000 crore in FY23, according to reports. 

Determining the exact magnitude of India's pre-owned car sector is challenging due to its predominantly unregulated nature. 

However, approximate calculations indicate that its worth in FY22 amounted to roughly $23 billion (equivalent to Rs 187,749 crore), with projections suggesting a compound annual growth rate (CAGR) of 19.5% until FY2027, as indicated in a study conducted by IndiaBlueBook.

CarTrade's Acquisition of OLX: Note from CarTrade's Exchange Filing

The announcement, made on July 10th, underlines CarTrade’s strategic expansion plans. As stated in a company exchange filing, "CarTrade Tech Limited has entered into a share purchase agreement with M/s Sobek Auto India Private Limited (“Sobek"), and its holding company OLX India B.V. for the acquisition of 100% stake of Sobek from OLX India B.V. subject to completion of certain conditions and on the terms and conditions agreed between the parties in the share purchase agreement."

CarTrade: Financial Performance

CarTrade has shown a consistent increase in revenue over the past few years. As of 31st March 2023, the income stood at ₹21,291.71 lakhs, a significant increase from ₹15,696.55 lakhs in 2022 and ₹11,324.67 lakhs in 2021.

The company has effectively managed its expenditure, which stood at ₹16,651.70 lakhs as of 31st March 2023, down from ₹30,889.66 lakhs in 2022. In 2021, the company's expenditure was ₹9300.76 lakhs.

The company bounced back from a loss in the fiscal year ending March 2022, registering a profit of ₹3,259.77 lakhs in the fiscal year ending March 2023. In 2022, the company posted a loss of ₹14,606.64 lakhs, while the profit for the fiscal year ending March 2021 stood at ₹2023.91 lakhs.

CarTrade: Share Price Performance

(Dated as on Jul 11, 2023)

The acquisition announcement seems to have positively influenced investor sentiments, as reflected in CarTrade's share price performance. 

Shares of CarTrade Tech rallied nearly 17% in opening trade on Tuesday, July 11, 2023, after the company announced a deal to buy OLX India's auto sales business. Further, the share price has surged by 11.86% in the past month. Over the past year, the share price has increased by 15.39%, and over the past five years, it has appreciated by a staggering 61.04%.

The convergence of two significant players in the Indian online auto marketplace will undoubtedly alter the industry's landscape. This strategic move allows CarTrade to augment its already expansive vehicle inventory, further enhancing customer choice and consolidating its leading position in the market.