CarTrade Tech’s Rs 2,999-crore IPO, which opened for subscription today, has received a 23 per cent subscription so far. The offer will be available for subscription till Wednesday, August 11, 2021. The public issue of this online auto classified platform is entirely an offer for sale (OFS) of 1.85 crore equity shares. In the primary market, the premium in CarTrade Tech has fallen to Rs 310, from Rs 700, last week, following the weak listings of Glenmark Life Sciences and Rolex Rings. On Monday, CarTrade Tech shares were trading at Rs 1,928 apiece, a premium of 19 per cent in the grey market, according to the people who deal in shares of unlisted companies.
On the first day of the bidding process, Retail investors were seen subscribing to half of their reserved portion While Non-institutional investors (NIIs) and Qualified institutional buyers (QIBs) were yet to put in their bids. CarTrade, which is backed by marquee investors such as Warburg Pincus, Temasek, JP Morgan and March Capital, raised Rs 900 crore from anchor investors on 6 August 2021. CarTrade Tech is a multi-channel auto platform with coverage and presence across vehicle types and value-added services through its brands — CarWale, CarTrade, Shriram Automall, BikeWale, CarTradeExchange, Adroit Auto and AutoBiz.
Should you subscribe to the CarTrade Tech IPO?
CarTrade Tech has no listed peers in the market. Covid-19 has impacted its FY21 financials. At the upper end of the IPO price band, it is offered at 4.4x P/BV and 29.6x EV/Sales and 73.4x P/E if accounting adjustments for deferred tax is excluded and attributed it on equity, then the asking price is at a P/E of around 199.26x to its FY21 earnings with a market cap of Rs.74,159.5 million which shows the issue is priced exorbitantly. However, considering the future prospect of the company and it is also placed at a sweet spot as the first mover advantage, Anand Rathi assigned subscribe rating to CarTrade Tech IPO and advised that investors can invest in this company with medium to long term perspective.
Antique Stock Broking
While valuations appear stretched (in line with most Internet businesses), Antique Stock Broking liked the combination of strong brand platforms, customers & dealer relationships, and an expanding suite of offerings which has helped the company create a robust scalable business model. Key risks to CarTrade Tech’s IPO include decline in individual car ownership (opting for ride-hailing services) or in demand for certain types of vehicles – due to change in technology or govt regulation; fraudulent behavior of sellers or purchasers of used vehicles listed on the platforms; and failure to protect personal information and other data. Company turned profitable in FY19 and is the only profitable automotive digital platform for FY20 among key competitors in India.
CarTrade Tech is the only profitable player in India and one of the few players internationally in the vehicle platform space. It owns the No.1 ranked platforms in their respective categories i.e. Carwale & Bikewale, which instills confidence in the sustainability of its growth which is powered by this network effect. Further, with a war-chest of Rs. 668 Cr in balance sheet, CarTrade Tech is well positioned and plans to capture adjacent business opportunities such as insurance, financing, servicing of vehicles, accessories and refurbishment cum sale of cars. Analysts at Nirmal Bang believe CarTrade Tech offers an attractive opportunity to participate in a new age business with a leading vehicle platform company at P/B of 4.2x & M.Cap/Sales of 27x.
Rating No rating
The automotive industry in India is highly competitive. The company’s key competitors include brands such as Cars24 (Cars24 Services Pvt Ltd), CarDekho and BikeDekho (Girnar Software Pvt Ltd), Droom (Droom Technology Pvt Ltd) and Mahindra First Choice Wheels Ltd. Cartrade has an advanced and sophisticated technology platform. Their data-driven digital platforms operate on an integrated technology infrastructure that is powered by their self-collected data and analytics. They have a large data set on vehicles in India. Their websites and apps handled approximately 1.76 million user sessions per day for the 3 months ended June 30, 2021.
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