CarTrade Tech IPO plans to raise about Rs. 3,000cr entirely through an offer of sale. The IPO entails an offer for sale of up to 18,532,216 Equity Shares by the Selling Shareholders, namely, CMDB II, Highdell Investment Ltd, Macritchie Investments Pte. Ltd, Springfield Venture International, Bina Vinod Sanghi, Daniel Edward Neary, Shree Krishna Trust, Victor Anthony Perry III and Vinay Sanghi. CarTrade Tech is 11 year old start-up founded by former CEO of Mahindra First Choice. CarTrade, a multi-channel auto platform with coverage and presence across vehicle types and value-added services, operates under several brands.

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CarTrade Tech IPO Details:

Issue Size (₹ Cr)₹ 2,937 – 2,999 Cr
Bid Lot9 Shares and in multiple thereof
Price Band₹ 1,585 -1,618
Issue Structure : 
QIB50% of the offer
NIB15% of the offer ( ₹ 449.78 Cr)
Retail35% of offer (6,486,276 Shares , 1,049.48 Cr)
Appls for 1x Retail7.2 Lacs
RegistrarLink Intime India Pvt. Ltd.

ANCHOR ISSUE: Ahead of its IPO CarTrade Tech raised Rs 900 crore from anchor investors. Prominent anchor investors include Nomura, HSBC Global, Goldman Sachs, Jupiter India Fund, Elara India Opportunities Fund, Aditya Birla Sun Life Insurance Company, Bajaj Allianz Life Insurance Company, Bharti Axa Life Insurance Company, Axis Mutual Fund (MF), HDFC MF, Kotak MF and Sundaram MF etc.

Indicative TimeLine:

  • Bid/Offer Opens : August 09, 2021
  • Bid/Offer Closes: August 11, 2021
  • Finalization of Basis of Allotment : August 17, 2021
  • Unblocking of Funds: August 18, 2021
  • Credit of Equity Shares : August 20, 2021
  • Trading of the Equity Shares : August 23, 2021

About CarTrade Tech:

  • CarTrade Tech is a multi-channel auto platform with coverage and presence across vehicle types and value-added services.
  • We launched CarTrade and CarTrade Exchange in 2009. Subsequently, we acquired Automotive Exchange Private Limited (CarWale) in 2016, we acquired 55.43% of the outstanding
  • equity interest in SAMIL, which added automalls across India to our platform.
  • The company’s platforms operate under several brands: CarWale, CarTrade, Shriram Automall, BikeWale, CarTrade Exchange, Adroit Auto and AutoBiz. Through these platforms, CarTrade Tech enables new and used automobile customers, vehicle dealerships, vehicle OEMs and other businesses to buy and sell their vehicles in a simple and efficient manner.
  • The company’s consumer platforms i.e. CarWale, CarTrade and BikeWale, collectively get 3.2 crore average unique visitors every month (during the 3 months period ending March 31 2021) and Shriram Automall and other auction platforms had 8,14,316 vehicles listed for auction during FY 2021.
  • The company generates revenues from commission and fees from auctions, re-marketing services, lead generation, online advertising, technology-based services to OEMs, dealers, financial institutions, inspection and valuation services.
  • Its platforms are operated by 221 technology employees working at its 3 technology centers as of June 30, 2021.
  • CarTrade Tech is a professionally managed company with no identifiable promoters.

CarTrade Tech IPO: Financials

Particulars / (₹ In Cr)202120202019
Revenue from Operations249.68298.28243.28
Revenue Growth (%)-16.29%22.61%
EBITDA as stated71.259.7953.03
EBITDA (%) as stated25.29%18.77%19.88%
Adj. EBITDA as stated77.7572.3365.15
Adj. EBITDA (%) as stated27.62%22.71%24.42%
Profit Before Tax46.9838.9235.43
Net Profit for the period101.07^31.2925.92
Net Profit (% ) as stated40.48%10.49%10.65%
FV10  
EPS – Basic (₹ )22.065.654.31
EPS – Diluted (₹ )19.195.073.87
RoNW (%) as stated5.43%1.73%1.36%
NAV(₹ ) as stated392.83325.75317.8
Equity Share Capital45.834  
IPO Price1618
EPS (excluding EO, defered tax) FY217.00
PE 231.14
Market Cap7416
Market Cap  /  Sales29.7

Pros

  • Strong growth in used vehicles is a positive
  • CarTrade Tech enjoys strong competitive positioning due to betterits brand, superior customer experience, and integrated functionality under one roof.
  • CarTrade Tech is the only profitable player among other key players.
  • CarTrade Tech intends to monetize other value added services and untapped opportunities.

Cons

  • Risks from any possible re-emergence of Covid.
  • Cyclical nature of the auto sector.
  • Highly competitive.
  • failure to protect personal information and other data could damage company’s rputation and brands
  • unable to keep pace with advances in technology or develop and introduce new and complementary products and services in a timely manner

CarTrade Tech IPO: Assessment

  • India became the fifth largest car market in year 2020. Further country’ two-wheeler market is big and dominates the overall market in terms of volume, owing to a growing middle class and a young population.
  • India is expected to become world’s 3rd largest automotive market by 2025 in terms of volume, driven by key factors such as digitization, changing consumer behavior and innovative services.
  • As of FY20, total addressable market for Indian automotive portals was estimated at ~US $14.3 billion. All payers combined addressed only a small portion of it.
  • with 90% Indian customers are estimated to be using online channels for research before buying a new or used car, the space is well poised for market share gains by organized players. CarTrade Tech could gain due to end to end presence.
  • Company’s websites CarWale and BikeWale were ranked No. 1 in relative online search popularity compared to peers during FY21.
  • From FY20 onwards , Shriram Automall has been a leading used vehicle auction platform based on number of vehicles sold. It follows an asset light model and 111 out of 114 automalls are leased.
  • CarTrade Tech enjoys high brand visibility and affinity, as indicated by the fact that ~88% of FY21 unique visitors were organic (unpaid).
  • CarTrade Tech is the only profitable automotive digital platform among its key peer set as of FY20. it had surplus cash amounting to Rs. 650 crore as of FY21.
  • The company is doing better compared to unlisted peers and appears to have has a strong brand, better technology platforms, a profitable & scalable business model.
  • The company generates revenues from commission and fees from auctions and remarketing services, online advertising solutions, lead generation, technology based services to OEMs/Dealers/Banks and other financial institutions and inspection and valuation services
  • CarTrade Tech IPO elicited good response from Anchor investors.
  • On the flip side CarTrade’s in April 21 raised funds at Rs. 1,377 per share. Further the company has hinted at a weak Q1FY22 due to COVID.
  • In Jun 2020, CarTrade Tech issued shares to the PE investors for at Rs. 825 per share.
  • Further 40% dilution at one go in OFS and entirely as an OFS provides little comfort.
  • CarTrade Tech IPO was last reported to be commanding a GMP of about Rs. 320.
  • CarTrade Tech IPO is demanding a P/E multiple 73.37x, but the adjusted FY21 PAT of the company is only Rs. 35 cr. as the net profit for FY21 is actually inflated by Initial recognition of deferred tax asset consequent to revision in estimate amounting to Rs 59.150 crore. Thus the IPO is being Offred at a very high PE ( more than 200x).Further significant portion of profit is from treasury income.
  • There is no comparable listed peers, Just for comparison Indiamart Intermesh Ltd. quotes at a PE of 76.1x and at a market Cap/ Sales of 32x of its FY21 consolidated sales.
  • The CarTrade Tech IPO is priced quite high. Unlike some recent IPOS like GR infra, Tatava Chintan, Clean Science the trend in the latest offering of IPOs is to factor in all future possibilities in the price. The Issues may fetch a premium till the mad rush at these prices continues and one big flop will bump it off.
  • I intend to apply in CarTrade Tech IPO on last day only if there is good demand and this has more to do with present frenzy for these shares, greed of PE funds and promoters than fundamentals.

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2)  Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors.  I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or  leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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