Initially named as ‘Kaymo Fastener Company Private Limited’, the company got incorporated in April 2000. In July 2019, the shareholders approved to change the name to ‘MXC Solutions India Private Limited’. Subsequently, in March 2021, the company was renamed Cartrade Tech Limited (‘The Company’). The company is coming up with an IPO, which opens for subscription on August 9, 2021. Here is all you would like to know about Cartrade Tech Limited IPO.
- Cartrade operates several platforms – CarWale, CarTrade, Shriram Automall, BikeWale, CarTrade Exchange, Adroit Auto and AutoBiz
- The company’s platforms, CarWale and BikeWale, are top-ranked on online search popularity vs competitors during fiscal 2021
- Shyam Automall is a leading used vehicle auction platform based on the number of vehicles listed in fiscal 2020
- Offers a multi-channel auto platform that has coverage and presence across vehicle types and value-added services
- The automotive ecosystem is quite fragmented and complex. Inefficiencies in the ecosystem lend an opportunity for the online automotive marketplace. The size of this industry is approx.. ~$14.3B in the financial year ending 2020 as disclosed by the company in prospectus
The company enables new and used automobile customers, vehicle dealers, vehicle OEMs, and other businesses to buy and sell their vehicles through the platform. In other words, the vision is to create an automotive digital ecosystem that connects several stakeholders. Here is a snapshot of company’s ecosystem:
The sources of revenue are:
- Commission and fees from the auction and remarketing services of used vehicles
- Online advertising solutions
- Lead generation for OEMs
- Technology-based services
- Inspection and valuation services for banks and other financial institutions
Key company strength areas
- A leading online marketplace for automotive sales with a collaborative ecosystem
- The brands and customer experience and extremely powerful. The company witnessed an average of 27.1M unique visitors in the three months ended June 2021 (25.7M in the same period 2020)
- Cartrade operates a proprietary end-to-end technology platform
- High focus on data science to provide a superior solution to customers. The algorithm studies several parameters, including, vehicle-related information, vehicle registration records, customer buying patterns and behaviour, demographics, macroeconomic information, etc.
- The company has a profitable business model and delivers a strong EBITDA
- A founder-led experienced management team
About the promoter
The company is professionally managed and does not have an identifiable promoter.
Below is the condensed financial information:
Comparison with other industry peers
There are no listed peers that engage in a business similar to the company.
|Offer for sale (18,532,216 equity shares)||Rs 2,999.5 Cr|
|Gross issue size||Rs 2,999.5 Cr|
Utilization of proceeds:
- The company will not receive any proceeds from the IPO
India is the fifth largest car market globally. However, the vehicle penetration of ~22 cars per thousand population in 2019 is the lowest globally. The company expects penetration to expand, and India will move high in ranks in terms of volume. In conclusion, the growth in the automotive sector and digitalization will benefit the company.
Cartrade is a multi-channel auto platform that has a presence across vehicle types and value-added services.
The digital ecosystem that the company provides has a massive opportunity across the various transaction segments. These include vehicle deals, after-sales, advertisement spends, auto financing, auctions and remarketing, auto insurance and inspection/valuations.
In terms of the offer valuation, the P/E ratio at the upper end of the price band is 84.3x of fiscal 2021 diluted earnings per share. Thus, we believe the offer is undoubtedly highly priced.
The company has delivered strong margins over the past three years. This measure differentiates Cartrade from the other technology-based companies recently listed, where margins were still in the red. In conclusion, we believe the company is a good investment opportunity from a long term perspective and recommend investors to subscribe. However, do refrain from investing with any short term expectations. Yet, the market may not disappoint investors there either.
The information provided in the red herring prospectus filed by the company with the Securities and Exchange Board of India (www.sebi.gov.in) is the basis for this note. However, I recommend that the reader validate the data before making any financial decision. Also, investment in an initial public offering (IPO) is subject to market risks. Therefore, it should be evaluated, keeping your risk profile and investment objective in mind. The author will not be responsible for any financial loss or otherwise resulting from any action taken based on the above.
About the author
The author is a senior finance professional with over fifteen years of work experience in corporate finance. He has an affinity for matters relating to personal finance and investment management. Through his writing, the author wants to share his knowledge and understanding of the subject.
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