[Aditya]

CarTrade Tech Ltd, which had hit near unicorn status post its last fundraising round in April, is one step closer to becoming India’s first online auto classifieds marketplace to list on the domestic bourses.

The firm - backed by marquee investors such as Temasek, Warburg Pincus and JP Morgan - has filed its draft red herring prospectus (DRHP) with SEBI to raise around Rs 2,000 crores via an initial public offer (IPO), sources with knowledge of the matter told Moneycontrol.

“The papers have been filed with the market regulator. There is no fresh issue of shares and the IPO consists of a pure OFS or offer for sale of 12,354,811 equity shares,” said one of the individuals cited above.

“The IPO will facilitate a partial exit for CarTrade investors like Warburg Pincus, Temasek, JP Morgan, March Capital and other parties who are the selling shareholders,” said a second individual.

“Axis Capital, Kotak Mahindra Capital, Nomura and Citi are the investment banks works on the CarTrade IPO," a third individual told Moneycontrol.

In mid-April, CarTrade sealed a $25 million fundraising round led by IIFL & Malabar Investment Advisors, after which it was valued close to a $1 billion (unicorn status).

According to reports in March 2020, the firm had a gross merchandise value of around $3 billion and was planning to apply to the RBI for an NBFC license. A June 3, 2020 report by Inc42 said that Cartrade earned Rs 137.14 crore in FY20, with a total expense of Rs 128.25 crore resulting in a net profit of Rs 8.88 crore.

Source: Money Control

[Thermodynamics]

Thanks for the post. Used car classifieds are aplenty and the top players are Cardekho, Cars24, Mahindra first choice,Olx etc.,

Though, I have no idea about CarTrade or how good it fares among competition, there is a growing market demand for used cars driven by affordability and lower depreciation.

However, 2000 Crores IPO looks too much for a lesser known brand. Since it is entirely offer for sale I tend to believe that promoters are packing their bags making best use of leftover euphoria in the market for IPOs.

Can anybody shed light how good they are from a business point of view?

[Turbanator]

They are very strong in B2B side. Most trade auctions happens at this platform. And so does a lot of insurance auction. There is definitely a demand for such platform which essentially in itself is very basic but somehow gets most sellers. Perhaps, their marketing is strong or the sellers find a wide audience. We have used this primarily for BMW auctions and another member picked a Porsche, I think it was VW finance.

They must be short of money, so came up with IPO. I have asked refund for the security deposit we paid them last year but haven’t got back yet

Originally Posted by SmartCat

Some venture capital math -> If Rs. 300 cr revenue company (Cartrade) is worth $1 billion, how much is a Rs. 3,000 cr revenue company (Cars24) worth?

Comparison with cars24 isn’t fair as cartrade is not in consumer side. Cars24 operates at multiple locations, have stores and manpower and does have a strong business case (who doesn’t these days, anyways)

If the idea of car trade is also to built something like cars24 or first choice, it will be a big gamble. This space has a lot of players and I don’t see them to have any differentiator.

[SmartCat]

Originally Posted by Thermodynamics

However, 2000 Crores IPO looks too much for a lesser known brand.

Cartrade is not that well known among consumers, but carwale.com is. Cartrade owns Carwale.com/Bikewale.com. They also own Shriram Automall, an online/offline vehicle auction company. https://www.samil.in/

Took a quick look at the IPO prospectus. This comparison of financials is interesting, especially Cars24.com's.



Some venture capital math -> If Rs. 300 cr revenue company (Cartrade) is worth $1 billion, how much is a Rs. 3,000 cr revenue company (Cars24) worth?

[Thermodynamics]

Originally Posted by SmartCat

Took a quick look at the IPO prospectus. This comparison of financials is interesting, especially Cars24.com's.
Attachment 2157131

Thank you.
Never knew Carwale is owned by them. Also thanks for the chart. The other expenses data is intriguing. While other players show heavy costs in that category bringing netprofit negative/negligible, CarTrade seems to be the only player that has a decent number to show at least for the time being

[anandhsub]

Originally Posted by SmartCat

Attachment 2157131

Some venture capital math -> If Rs. 300 cr revenue company (Cartrade) is worth $1 billion, how much is a Rs. 3,000 cr revenue company (Cars24) worth?

Doesnt this look like cars24 is treating the entire value of the car as revenue/costs while cartrade is only looking at the comission earned?

Different business models I suppose.

[SmartCat]

Originally Posted by anandhsub

Doesnt this look like cars24 is treating the entire value of the car as revenue/costs while cartrade is only looking at the comission earned? Different business models I suppose.

You are right - I missed that. This gives a better picture:

Originally Posted by Thermodynamics

While other players show heavy costs in that category bringing netprofit negative/negligible, CarTrade seems to be the only player that has a decent number to show at least for the time being

From this article:
https://inc42.com/buzz/what-made-ipo...e-marketplace/

“We operate on an asset-light business model, operating only 114 auto-malls, a large majority of which we lease or rent from third parties. We have invested significantly in building technology platforms that can manage considerably increased offerings without requiring sizable additional investments, and our growing scale has resulted in a decrease of the share of fixed costs,” the company’s prospectus said.

The company believes that its investments in technology have made its various platforms and services scalable without high capital expenditure. The company added that the asset-light business model has allowed it to use cash on the balance sheet for acquisitions, which is one of its key strategies.

[reppy]

Originally Posted by SmartCat

Some venture capital math -> If Rs. 300 cr revenue company (Cartrade) is worth $1 billion, how much is a Rs. 3,000 cr revenue company (Cars24) worth?

Can't compare like that. Markets value companies on multipliers of profits (or projected profits) and its growth potential.

[AirbusCapt]

A big bubble waiting to burst. All hype, very little physical presence, most of the "assets" are third party owned. When any business claims to be "asset light" as its USP, our rubbish antenna should be up. They have provided no data of their "dead stock" in terms of automobile held, real estate inventory etc. This IPO game is the 2021 multilevel marketing scam.

[kushagra452]

Thanks for sharing the financials and other details. I am surprised not to see Spinny in that list. However, I do wonder for how long can these companies and VCs/other investors continue playing the game of musical chairs? New performance metrics, valuation multiples are coming up to justify the exorbitant valuations. The slew of IPOs means that smart money is exiting before this house of cards comes falling down.

[TusharK]

CarTrade IPO to open on August 9

CarTrade Tech Limited is proposing to open its Initial Public Offering (IPO) of Equity Shares on August 9, 2021. The price band for the offer has been determined at Rs. 1,585 - Rs. 1,618 per Equity Share. The offer closes on August 11, 2021.

According to the company, it will be 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 (jointly held with Vinay Vinod Sanghi), Daniel Edward Neary, Shree Krishna Trust, Victor Anthony Perry III, Vinay Vinod Sanghi (jointly held with Seena Vinay Sanghi). The Company will not receive any proceeds from the offer.

CarTrade Tech is a multi-channel auto platform with brands such as CarWale, BikeWale, CarTrade, Shriram Automall, CarTrade Exchange, Adroit Auto and Auto Biz.

[schwartz]

Hi,

Here is a table that summarizes positions each the companies have in the various segments of the business.



Please Note: This information has been gathered basis informal conversations with friends in the business. Therefore these numbers may be off by a margin.

Mahindra First Choice has a slightly different business model. Around 1700 used car dealers are empaneled with them as franchisees. They sell between 30 to 40k cars per month.

Apart from the above revenue lines, most of these companies offer ancillary services such as car loans and insurance. Cardekho also runs InsuranceDekho. However, I dont have any numbers about the portal.

Hope this helps.

[whitewing]

I was keen on investing on this one - but on a quick look at their RHP, I tend to think they are making hay when the sun shines. A potential for investment if there is a significant drop post listing. Although one part of the mind says - join the lottery, subscribe and sell the lot on listing.

The +ves for subscribing:
1. This also is one of the rare startups already making (some) money
2. Their customer facing portals already well known, so there is a certain amount of stickiness w.r.t user base.
3. Their revenue stream is a mix of commissions, ad revenue and a small portion from vehicle valuations. If their customer facing portals continue to be popular, the ad revenue will probably increase.
4. Used car market is given a fillip due to covid and its aftermath, where more people are likely to choose personal transport - fuel price notwithstanding.
And more importantly, given how the wind is blowing, an "internet" IPO will make money, irrespective of if the business makes a profit :-)

The points against investing:
1. Valuations- unreal valuations, with no time horizon on when this will return in value.
2. The existing investors seem to be cashing out. Of course it is their well-earned prerogative, but doesn't it signal that they no longer believe that the risk/reward is favorable?
3. 35% of the IPO is for retail?Not sure if this is good or bad, I tend to think that this is a negative.
4. Goodwill on the books -It has a good will of 8,979.61Cr – this almost 2/3 of the assets on book! What is to say that this is/not vapour money?
5. Of the restated profit of 1010.74cr, more than half comes from a tax credit(I don’t understand how a company with an annual ~100cr tax expense can get a tax credit of 500cr, but then I'm someone who struggles to submit my ITRs on time). If we take that out as a one off, then the earnings are roughly on par with previous years, no major spike in growth. This in-spite of reducing their Ad expenses significantly. So much for the growth story.
Would be interested if someone could shed some light on how such a large tax credit is possible?

[Thermodynamics]

I picked Cartrade post listing loss. Although I am sitting with 3% profit, not very keen on holding it.

One of the reason being that Carwale is quite outdated. According to them XUV700 isn’t yet launchedLink.

[no_fear]

Originally Posted by whitewing

The points against investing:
1. Valuations- unreal valuations, with no time horizon on when this will return in value.
2. The existing investors seem to be cashing out. Of course it is their well-earned prerogative, but doesn't it signal that they no longer believe that the risk/reward is favorable?
3. 35% of the IPO is for retail?Not sure if this is good or bad, I tend to think that this is a negative.

I will take a stab at answering some of them. I am looking at the share price currently and may add to my trading portfolio.

1. Valuations make no sense and I do not take them into account. These are all growth stocks with investors willing to overlook the financial mumbo jumbo as long as the music keeps playing and the companies actually grow the business.
2. Existing investors may cash out as they have entered in the initial seed stages. It may not be a cause of concern as early stage investors have already made their profits and will be looking to deploy capital on the next best thing coming up. This is fairly standard
3. IPOs are often allotted for institutional investors by underwriters. In this case 35% for retail is not a cause of concern. It takes a bit of time for institutions to warm up to IPOs in general.

I would wait and buy the stock on dips. The amount of free money that is floating globally is mind boggling and global investors are all chasing yield. With US treasuries and gold prices down, China playing fast and loose with its stock market, the India stock market has suddenly become the golden poster boy.

Every institutional investor spokesperson is praising the Indian equity market and I feel its the classic pump and dump scheme being played now, but I am ok to ride the wave and then sell when the sell mania starts.