Last updated on August 12th, 2021 at 03:50 pm
CarTrade Tech IPO – Fundamental Analysis
Car Trade is a multi-channel auto platform with coverage and presence across vehicle types and value-added services. The platforms operate under several brands: CarWale, CarTrade, Shriram Automall, BikeWale, CarTrade Exchange, Adroit Auto, and AutoBiz. The company’s IPO is slated to open on 9th Aug 2021.
Offer Details of Car Trade IPO
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| Offer Details | |
| Offer Size | Rs 2998.51 crore |
| of which | |
| Fresh Issue | NIL |
| Offer for sale | 1,85,32,216 equity shares amounting to Rs 2998.51 crore |
| Price Band | Rs 1585-Rs 1618 per share |
| Offer Period | Aug 9- Aug 11, 2021 |
| Offer Structure | QIBs: upto 50% of the offer NIIs: upto 15% of the offer RIIs : upto 35% of the offer |
| Market Lot | Minimum 1 lot; 9 shares (Rs 14,562) Maximum 13 lots; 117 shares(Rs 1,89,306) |
| Listing on | BSE, NSE |
| BRLM’s | Axis Capital, Citigroup Global Markets,Nomura Financial Advisors and Securities Pvt. Ltd., Kotak Investment Banking |
| Registrar | LinkIntime |
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What to know before investing in Tech IPOs?
These platforms enable new and used automobile customers, vehicle dealerships, vehicle OEMs, and other businesses to buy and sell their vehicles in a simple and efficient manner. Car Trade aims at creating an automotive digital ecosystem that connects automobile customers, OEMs, dealers, banks, insurance companies, and other stakeholders.
The business model under different verticals of Car Trade
- CarWale and CarTrade platforms are visited by car shoppers to research and connect with dealers, OEMs, and other partners to sell and buy cars from the large variety of new and used cars offered by them. In addition, the company also connects with financing and automotive ancillary companies to offer their products and services on CarWale and CarTrade.
- Bike Wale platform is visited by customers looking for new and used two-wheelers to research and connect with dealers, OEMs, and other partners to sell and buy two-wheelers from the large variety of new and used two-wheelers offered by them.
- Car Trade’s subsidiary, Shriram Automall, facilitates sales of pre-owned cars, two-wheelers, commercial vehicles, three-wheelers, and farm and construction equipment.
- CarTrade Exchange is an online auction platform and a used vehicle enterprise resource planning (“ERP”) tool. It is used by consumers, business sellers, dealers, and fleet owners to sell vehicles to automotive dealers and fleet owners. Automotive dealers also use CarTrade Exchange to manage their processes for procurement, inventory management, and customer relationship management (“CRM”).
- Adroit Auto offers vehicle inspection and valuation services used by insurance companies, banks, and other financial institutions.
- AutoBiz provides new car dealers a CRM solution to manage their customers in an efficient manner.
These data-driven digital platforms operate on an integrated technology infrastructure that is powered by self-collected data and analytics.
Revenue generation comprises-
(a) Commission and fees from the auction and remarketing services of used vehicles for retail customers, banks and other financial institutions, insurance companies, OEMs, leasing companies, and fleet and individual operators.
(b) online advertising solutions on CarWale, CarTrade, and BikeWale for OEMs, dealers, banks, and other financial institutions;
(c) lead generation for OEMs, dealers, banks, and other financial institutions and insurance companies;
(d) technology-based services to OEMs, dealers, banks, and other financial institutions and insurance companies;
In the three months ended June 30, 2021, CarWale, CarTrade and BikeWale collectively had an average of 27.11 million unique visitors per month, with 88.14% being organic visitors. The brands, CarWale and BikeWale, ranked number one on relative online search popularity when compared to their key competitors over the period from April 2020 to March 2021.
Key Financial Highlights
- The pandemic affected the revenues for FY21 and resulted in a reduction in the revenues by 11.60% to Rs 281.52 crore as against total revenues of Rs 318.45 crore in FY20. The total revenues were Rs 266.81 crore for FY19.
- The profitability margins have been at reasonable levels. EBITDA margins have been in the range of 20-25% and net margins are at the level of 10% for the last three fiscals. In FY21, PAT has substantially increased due to the accounting adjustment of deferred tax in the B/S. If we ignore this adjustment, the adjusted PAT is Rs 37 crore for FY21 (Rs 31 crore in FY20). It should be noted that the company became profitable in FY19.
- The company has a healthy cash position. Net cash generated from operations was Rs 35.20 crore for FY21.
- Debt to equity is 0.06 as on 31st March 2021 and a weighted average return on net worth is 3.52% for the last three fiscals.
- The Issue is priced at 73.35 (P/E) with EPS of 22.06 per share calculated at the upper price band of Rs 1618 per share. If the company’s adjusted profits are considered for P/E, the pricing of the issue would be much higher. The valuation appears to be stretched at the higher side. At NAV of Rs 392.83 per share, P/BV is 4.12x.
- Valuation parameters
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| Valuation Parameters (fig as on 31st March 2021) | EPS | P/E | NAV | P/BV |
| 22.06 | 73.35 | 392.83 | 4.12 |
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As per RHP, there are no listed peers of the Issuer. However, Cars 24, CarDekho, Mahindra First Choice, and Droom are the unlisted peers.
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| Particulars (Fig FY20 in crores) | CarTrade Tech | Cars 24 | CarDekho | Mahindra First Choice | Droom |
| Total Revenues | 318.3 | 3065.2 | 754.7 | 375.8 | 179.5 |
| EBITDA | 59.2 | -267.2 | -284.0 | 0.5 | -80.3 |
| Net profit margin | 9.20% | -9.30% | -43.30% | -1.90% | -46.20% |
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Investment Strategy
The online platforms of CarTrade Tech have seen strong organic growth. In the three months ended June 30, 2021, CarWale, CarTrade and BikeWale collectively had an average of 27.11 million unique visitors per month, with 88.14% being organic visitors. The Issuer would benefit from the unique visitor traffic and would provide an opportunity to grow other business lines with relatively low entry barriers.
The financial performance of the Issuer is reasonable though it needs to be tracked for the upcoming quarters as well since the revenues have reduced in FY21. The Issue is also highly-priced. But it should also be noted that CarTrade Tech is the only profitable company amongst its peers and operates on an asset-light business model using technology which is a strength for the company. Listing gains for the Issue is dependent on the demand supply; the current GMP of the IPO is 30%. Looking at all the above factors investors may subscribe to the Issue.
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| Subscription Status {no. of times (x)} | ||||
| Particulars | Shares Offered | 9th Aug | 10th Aug | 11th Aug |
| QIB | 37,06,443 | 0.01 | 0.59 | 35.45 |
| NII | 27,79,833 | 0.03 | 0.27 | 41.00 |
| Retail | 64,86,276 | 0.80 | 1.53 | 2.75 |
| Employees | ||||
| Total | 1,29,72,552 | 0.41 | 0.99 | 20.29 |
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