| Issue Size- 1.85 bn shares | Issue Open/Close – Aug 09/Aug 11, 2021 |
| Price Band (Rs) 1,585-1,618 | Issue Size- 29.37-29.99 bn |
| Face Value (Rs) 10 | Lot Size (shares) 9 |
Cartrade Tech (CTT) is a multi-channel auto platform with a presence across varied vehicle types and value-added services. Through its platforms (operated under the brand names of CarWale, CarTrade, Shriram Automall, BikeWale, CarTrade Exchange, Adroit Auto and AutoBiz), the company serves as an integrated online and offline marketplace for vehicle owners, dealerships, OEMs and other businesses. Its services span the gamut of automotive transaction value chain, i.e. marketing, buying, selling and financing of new and pre-owned cars, 2-W, CV and other vehicles. As of FY21, Cartrade Tech had 2.6 crore monthly average unique visitors on its websites/apps (of which 88.4% were organic i.e. from unpaid sources) and featured 8.14 lakh vehicle listings on its online and offline auction platforms.
Investment Arguments
- As of FY20, total addressable market (TAM) for Indian automotive portals was estimated at ~US$14.3 billion (Rs 1.06 lakh crore), of which Cartrade Tech and key competitors combined covered only less than 5 pct. With more than 90 pct Indian customers 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 organised players (particularly ones with end-to-end presence) at the expense of current unorganised, fragmented industry segments. In this regard, Cartrade Tech stands to benefit courtesy its suite of strong brands.
- Its platforms, 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, while Shriram Automall is one of the leading used vehicle auction platforms based on number of vehicles listed for auction for the financial year 2020.
- The company operates on an asset-light business model, operating only 114 automalls, a large majority of which it lease or rent from third parties. It has invested significantly in building technology platforms that can manage considerably increased offerings without requiring sizable additional investments, and its growing scale has resulted in a decrease of the share of fixed costs.
Key Risks
- Investment by OEMs and/or dealers in their own digital platforms
- Technology upgradation, safety/security lapses of platforms/data
- Muted capital efficiency due to goodwill on balance (~50 pct of networth)
Valuation
Cartrade Tech is the only profitable automotive digital platform among its key peer set as of FY20. On the balance sheet front, it is a net cash positive company. Cartrade Tech offers a unique play on rising digitisation of new and pre-owned vehicle transaction value chain/ecosystem. This is the pure offer for sale (OFS) with company receiving no proceeds from IPO. The issue is aggressively priced at 271x FY21 earnings (adjusted for deferred tax credit) to encase on the first-mover sentiment. Given the prevailing preference for digital platforms including the recent listings, only a risk taker investor may opt the issue for long term.
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