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Updated on: Monday, August 09, 2021, 10:31 AM IST

CarTrade IPO opens today: Should you subscribe? Brokerages weigh in

Online auto classified platform CarTrade's public issue, with a price band of Rs 1,585-1,618 a share, will open for subscription on August 9 and conclude on August 11. | pixabay.com

Online auto classified platform CarTrade's public issue, with a price band of Rs 1,585-1,618 a share, will open for subscription on August 9 and conclude on August 11. | pixabay.com

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Online auto classified platform CarTrade's public issue, with a price band of Rs 1,585-1,618 a share, will open for subscription on August 9 and conclude on August 11.

At the upper end of the price band, the IPO is expected to mobilise Rs 2,998.51 crore.

Half of the issue size has been reserved for qualified institutional buyers (QIBs), 35 per cent for retail investors and the remaining 15 per cent for non-institutional investors.

Objectives

The objects of the Offer are to to carry out the Offer for Sale and to achieve the benefits of listing the Equity Shares on the Stock Exchanges

Valuation

The Company is bringing the issue at price band of Rs 1585-1618 per share at p/e multiple of 73 on post issue FY21 eps.

Bankers to issue

Axis Capital, Citigroup Global Markets India, Kotak Mahindra Capital Company and Nomura Financial Advisory and Securities (India) Private Limited are the investment bankers to the issue.

Raises Rs 900-cr from Anchor investors

On Friday, CarTrade said it has raised Rs 900 crore from anchor investors ahead of its initial public offering, which opens on Monday.

The company has decided to allocate 55,59,664 equity shares to anchor investors at Rs 1,618 apiece, valuing the transaction size to Rs 899.55 crore, according to a circular uploaded on the BSE website.

Nomura, HSBC Global, Goldman Sachs, Jupiter India Fund, Elara India Opportunities Fund, Aditya Birla Sun Life Insurance Company, Bajaj Allianz Life Insurance Company, Bharti Axa Life Insurance Company, Axis Mutual Fund (MF), HDFC MF, Kotak MF and Sundaram MF are among the anchor investors.

The initial share-sale will be entirely an offer for sale (OFS) of 18,532,216 equity shares.

Among the investors participating in the OFS are -- CMDB II (22.64 lakh equity shares), Highdell Investment Ltd (84.09 lakh shares), Macritchie Investments Pte Ltd (50.76 lakh shares), and Springfield Venture International (17.65 lakh shares).

Currently, CMDB II holds 11.93 per cent stake in CarTrade, Highdell Investment owns 34.44 per cent stake, MacRitche Investment has 26.48 per cent shareholding, and Springfield Venture International holds 7.09 per cent stake in the company.

Backed by marquee investors

Founded in 2009, CarTrade is backed by marquee investors -- Warburg Pincus, Temasek, JPMorgan and March Capital.

The CarTrade platform allows customers to buy and sell used cars as well as new cars.

The firm 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, CarTrade Exchange, Adroit Auto and AutoBiz.

Cartrade is a multi-channel auto platform with coverage and presence across vehicle types and value-added services. Company’s platforms operate under several brands: CarWale, CarTrade, Shriram Automall, BikeWale, CarTrade Exchange, Adroit Auto and AutoBiz. Through these platforms, company enable new and used automobile customers, vehicle dealerships, vehicle OEMs and other businesses to buy and sell their vehicles.

The company''s consumer platforms i.e. CarWale, CarTrade and BikeWale, collectively get 3.2 crore average unique visitors every month (during the three-month period ending March 31, 2021), and Shriram Automall and other auction platforms had 8,14,316 vehicles listed for auction during FY21.

The company generates revenues from commission and fees from auctions and re-marketing services, online advertising solutions, lead generation, technology-based services to OEMs, dealers, banks and other financial institutions, and inspection and valuation services.

Should you subscribe?

The Company, being leading marketplace for automotive sales with a synergistic ecosystem, has proprietary end-to-end technology platforms with focus on data science to provide solutions. Also, the Company is the only profitable automotive digital platform among peers with asset light model & decent EBIDTA margins. Hence Hem Securities recommends “Subscribe” on issue for both listing gain & long term purpose.

According to Marwadi Shares and Finance Limited, there are no listed companies in India that engage in a business similar to that of the Company. Accordingly, it is not possible to provide an industry comparison in relation to the Company.

The Company is well-positioned to benefit: from growth of the automotive sector and digitalization; grow business through digital ecosystem, online-offline presence and vehicle-agnostic approach, create opportunity to monetize value-added services and untapped opportunities through a strong customer base and technology platform, invest further in technology, and supplement organic growth with selective acquisitions.

Risks

The company's key competitors include automobile portals, independent used and new vehicle dealers, branded vehicle dealerships, other online dealers of new and used vehicles, websites and apps for the publication of classified advertisements, and car leasing companies, which directly sell used cars from their fleets to consumers and dealers. Company’s key competitors include brands such as Cars24 (Cars24 Services Private Limited), CarDekho and BikeDekho (Girnar Software Private Limited), Droom (Droom Technology Private Limited) and Mahindra First Choice Wheels Limited. Given that dealers are at the same time competitors who maintain their own offerings of vehicles, such dealers may decide to stop purchasing from company if they believe it threaten their competitive position or if company lose out to its online competitors, thereby forcing dealers to advertise or list their vehicles on its competitors’ platforms.

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Published on: Monday, August 09, 2021, 10:31 AM IST
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