CarTrade Tech Ltd (CarTrade) - IPO Update

Year 2021 looks like the year of digital IPOs. With the success of the Zomato IPO, others like Paytm and MobiKwik are fast tracking their IPO plans. One interesting digital IPO will be CarTrade Tech Ltd (owners of cartrade.com platform). In a draft red herring prospectus (DRHP) filed with SEBI, the company plans to sell close to 13.5 million shares to the public via offer for sale (OFS) raising approximately Rs.2,000 crore in the process.

About CarTrade Tech Ltd (CarTrade)

CarTrade was founded by Vinay Sanghi, former CEO of Mahindra First Choice Wheels, in 2009. CarTrade is a platform where potential buyers and sellers can register and also buy and sell used cars as well as new cars. The used car market in India is estimated at $27 billion as of Dec-20 and is estimated to grow at 15% annually.

The CarTrade platform runs 2 sub-portals. CarTrade.com caters to the consumers in buying and selling used and new cars. The B2B CarTradeExchange.com helps car dealers source leads and fulfil client requirements using the ecommerce channel more effectively.

Understanding the CarTrade business model

As is clear from the business description, CarTrade has a B2C component to its online business as well as a B2B portion. The company is backed by some of the marquee private equity names like Warburg Pincus, Temasek of Singapore, JP Morgan and March Capital. Some of its sub-platforms like CarWale.com and BikeWale.com are already ranked number one in relative search popularity.

Interestingly, CarTrade is one of the few online digital businesses in India to be making profits. For FY19 and FY20, the company made net profits of Rs.9.50 crore and Rs.7.62 crore on top line revenues of Rs.243 crore and Rs.298 crore respectively. If you combine its 3 principal B2C platforms; CarTrade, CarWale and BikeWale, it has around 29.9 million unique visitors in a month with more than 87% being organic visitors. That has the potential for huge expansion of ROI per customer.

What is the USP that CarTrade brings to the table?

The online digital offering comes as an end-to-end package for customers. The portals offer used car information, on-road dealer prices, certified used cars, expert reviews as well as a wide choice for buyers and sellers to make a most judicious choice. For a $27 billion industry like used cars and growing at 15% annually, the industry was highly fragmented with little centralized information and guidance. That is the gap that CarTrade fills.

CarTrade competes with names like Cars24, Quickr, OLX, Droom and Mahindra First Choice. In the past, CarTrade made inorganic acquisitions of CarWale, Axel Springer as well as Vehicle auctioning platform, Shriram Automall.

What are the details of the CarTrade IPO?

CarTrade plans to come out with ab IPO of up to 13.5 million shares via OFS. Selling shareholders will be as under.
 

Earlier in 2021, CarTrade raised $25 million funding round led by IIFL and Malabar Investment Advisors at a valuation of $1 billion. The CarTrade IPO valuation is likely to be better than pure Unicorn status. While the actual date is yet to be announced, the IPO is expected to hit the IPO market around August 2021.