Rushikesh BhiseCarTrade Tech IPO Details:
IPO Date: Aug 9th to Aug 11th, 2021
Total Shares for subscription: ~1.85 Crore
IPO Size: ~Rs. 3000 Cr
Lot Size: 9 shares
Price Band: Rs. 1585-1618 /share
Market Cap: 7,416 Crore
Recommendation: Avoid; Strictly listing gains only
Purpose of CarTrade Tech Ltd IPO
Exit to existing shareholders
About CarTrade Tech Limited
Cartrade is a multi-channel auto platform with coverage and presence across vehicle types and value-added services. They offer a variety of solutions across the automotive transaction value chain for marketing, buying, selling and financing of new and pre-owned cars, two-wheelers as well as pre-owned commercial vehicles and farm and construction equipment.
Their platforms operate under several brands: CarWale, CarTrade, Shriram Automall, BikeWale, CarTrade Exchange, Adroit Auto and AutoBiz.
During Q1FY22, their consumer platforms, CarWale, CarTrade and BikeWale collectively had an average of 27.11 million unique visitors per month, with 88.14% being organic visitors (i.e., as a result of unpaid searches). CarWale and BikeWale, ranked No. 1 on relative online search popularity when compared to their key competitors from Apr’20 to Mar’21. Their average time per visit of 3 minutes and 7 seconds during Q1FY22 on the CarWale website.
Their platforms are operated by 221 technology employees working at their 3 technology centers as of June 30, 2021
Business of CarTrade Tech
CarTrade Tech offers a variety of solutions across the automotive transaction value chain for marketing, buying, selling and financing of new and pre-owned cars, two-wheelers as well as pre-owned commercial vehicles and farm and construction equipment. The key offerings of the companies are as follows:-
- Car shoppers can visit CarWale and CarTrade platforms 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, Cartrade engage with financing and automotive ancillary companies to offer their products and services on CarWale and CarTrade.
- Customers looking for new and used two-wheelers can research and connect with dealers, OEMs and other partners on BikeWale to sell and buy two-wheelers from the large variety of new and used two-wheelers offered by them.
- Company’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.
The company generates revenue from Commission and fees from auction and remarketing services of used vehicles, Online advertising solutions on their website, Lead generation for OEMs, dealers, banks and other financial institutions, Technology-based services to OEMs, dealers, banks and other financial institutions, Inspection and valuation services for banks and other financial institutions. The company is the only profitable player among its competitors.
The company has a large data set on vehicles in India. Their websites and apps handled approximately 1.76 million user sessions per day in Q1FY22 and directly deliver the relevant data into their systems. Their team of statisticians and data scientists has developed complex and proprietary algorithms to transform this data into useable information that power their platforms and scale as traffic increases.
They present such information through their web and mobile user interface that is immersive, simple and intuitive. Leveraging their market-leading position and growing audience, they also provide valuable inputs to automotive dealers and manufacturers as they develop their digital marketing strategies through their consumer insights and innovative products, helping them reach customers more effectively and increasing the value of their offerings to such dealers and manufacturers.
Management of CarTrade Tech
Chairman, MD and CEO, Vinay Vinod Sanghi, has 30 years of experience in the automotive industry. He has previously been associated with Mahindra First Choice Wheels Limited and Project Automobiles (Bombay) Pvt Ltd. He has over 30 years of experience in the automobile industry.
Aneesha Menon is an Executive Director and CFO of the company. She was previously employed with S. R. Batliboi & Co. LLP and has 13 years of experience in the field of finance. She joined Automotive Exchange Pvt Ltd (an erstwhile Subsidiary which was subsequently amalgamated with the company) as AVP – Finance on December 8, 2015.
Financials of CarTrade Tech
Cartrade operates on an asset-light business model, operating only 114 auto-malls, a large majority of which they lease or rent from third parties. They have invested in building technology platforms that can manage considerably increased offerings without requiring sizable additional investments, and their growing scale has resulted in a decrease of the share of fixed costs.
Their investments in technology have made their platforms scalable in a capital-efficient manner, and the asset-light business model has also allowed them to use cash on their balance sheet for acquisitions which have formed important parts of their strategy in the past.
Strengths:
- Profitable and Scalable Asset-Light Business Model
- Presence in growing sector like new and resale automobiles
Risks:
- High Competition
- No differentiation nor consumer stickiness
MoneyWorks4me Opinion
How is the business model? Good, Great or Gruesome?
Good. Marketplace for new and resale car sales can be a good business model over time as a brand wins trust of buyers and sellers for transactions and assures them better deals. Since the company doesn’t require any assets, except marketing costs till it achieves critical mass, it can earn phenomenal profits from commissions they receive by connecting buyers and sellers.
Car Trade as such is not a unique player in this market as many similar sized players exist and advertise heavily. Usually, in any platform business one often sees winner takes all business due to networking effects. Large network pulls more people to its platform leading to more and more market share over time. Today around 4-5 players operate in similar segment with more or less similar offerings. We believe that it will be while till one can declare 2-3 of them as winners. We expect consolidation in the sector as so many players will find it hard to build a sustainable business model.
As one can see all players more or less earn similar commission hinting that they operate at similar scale of operations. Under such conditions, we will see great competitive intensity as each one of them will try to spend more to attract customers.
Valuation
- We are surprised looking at Car Trade IPO valuation; it is quite demanding for a company which has not yet established itself as a good business model.
- We expect there could be huge wealth destruction in this space (Cash burn to expand market and win customers) till clear winners emerge. Barrier to entry is NIL. Usually barrier to entry is created by network effect wherein 2-3 players capture the entire market. Only then this business model can be called as Good/Great.
- On the other hand, if all players were to co-exist, their profitability will be moderate and they will earn profits not very high than their cost of capital just to facilitating the trade.
- Recently its competitor Cars24 concluded fund raising of $200 million at $1 billion valuation which might be an anchor for IPO valuation of Car Trade.
- Even if we were to believe this business model can emerge winner, current valuation is too demanding atleast till it competes with numerous Private Equity funded players and industry consolidation happens.
- With entire proceeds of IPO going to existing investors equivalent of 40% of total market cap raises high doubts that they are cashing out from their investments.
We have seen lot of excitement in platform based businesses, so if one wants to speculate, he can APPLY FOR LISTING GAINS.
For now, we recommend Strong Avoid for Long term investors.
Note: We do not recommend buy just because the IPO market is hot. We do not earn any commission or fee for promoting IPOs so expect an honest review from us on the business model and valuation.
| IPO Activity | Date |
| IPO Open Date | Aug 9, 2021 |
| IPO Close Date | Aug 11, 2021 |
| Basis of Allotment Date | Aug 17, 2021 |
| Refunds Initiation | Aug 18, 2021 |
| A credit of Shares to Demat Account | Aug 20, 2021 |
| IPO Listing Date | Aug 23, 2021 |
| Application | Lots | Shares | Amount |
|---|---|---|---|
| Minimum | 1 | 9 | ₹ 14,562 |
| Maximum | 13 | 117 | ₹ 189,306 |
| Date | QIB | NII | Retail | Total |
| Aug 09, 2021 | 0.01x | 0.03x | 0.80x | 0.41x |
| Aug 10, 2021 | 0.59x | 0.27x | 1.53x | 0.99x |
| Aug 11, 2021 | 35.45x | 41.00x | 2.75x | 20.29x |
When will the CarTrade Tech Limited IPO open?
CarTrade Tech Limited IPO will open for subscription on Monday, August 9, and will close on Wednesday, August 11.
What is the price band of CarTrade Tech Limited IPO?
The price band for CarTrade Tech Limited IPO is Rs. 1585-1618.
What is the lot size for CarTrade Tech Limited IPO?
Retail investors can subscribe to the IPO minimum lot size is 9 shares, up to a maximum of 13 lots i.e. Rs. 1,89,306.
What is the issue size of CarTrade Tech Limited IPO?
The total issue size is ~ Rs. 2,998.51 Cr.
What is the quota reserved for retail investors in CarTrade Tech Limited IPO?
The quota for retail investors in CarTrade Tech Limited IPO is fixed at 10% of the net offer.
When will the basis of allotment be out?
Allotment will be finalized on August 17th and refunds will be initiated by August 18th. Shares allotment will be credited in Demat accounts by August 20th.
What is the listing date of CarTrade Tech Limited IPO?
The tentative listing of CarTrade Tech Limited IPO is August 23rd.
Where could we check the CarTrade Tech Limited IPO allotment?
One can check the subscription status on Link Intime India Private Ltd.
Who are the leading book managers to the issue?
Axis Capital Limited, Citigroup Global Markets India Private Limited, Kotak Mahindra Capital Company Limited, Nomura Financial Advisory And Securities (India) Pvt Ltd.
What does CarTrade Tech Limited do?
CarTrade Tech Limited is a multi-channel auto platform with coverage and presence across vehicle types and value-added services. Its platforms operate under several brands: CarWale, CarTrade, Shriram Automall, BikeWale, CarTrade Exchange, Adroit Auto and AutoBiz.
Who are the peers of CarTrade Tech Limited?
CarDekho, Mahindra First Choice, Cars24, Droom are peers of CarTrade Tech Limited
What if I do not get the allotment?
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