CarTrade Tech IPO – Issue Details, Review and Analysis [With Hidden Factors]
CarTrade Tech IPO (CarTrade IPO) Details
Mumbai based, CarTrade Tech is coming up with IPO that would open for subscription on 9th August, 2021. CarTrade Tech Ltd is a multi-channel auto platform provider company in India. Company has platform brands like CarWale, CarTrade, BikeWale etc. Company revenues are fluctuating. It generated 4x profits in FY21 compared to FY19 or FY20. Should you invest in CarTrade Tech IPO? What are the risk factors in this CarTrade IPO? How this company generated high profits in FY2021?
About CarTrade Tech Limited
They are a multi-channel auto platform with coverage and presence across vehicle types and value-added services. Its platforms operate under several brands: CarWale, CarTrade, Shriram Automall, BikeWale, CarTrade Exchange, Adroit Auto and AutoBiz. Through these platforms, they enable new and used automobile customers, vehicle dealerships, vehicle OEMs and other businesses to buy and sell their vehicles in a simple and efficient manner. Its vision is to create an automotive digital ecosystem which connects automobile customers, OEMs, dealers, banks, insurance companies and other stakeholders.
Company 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. Shriram Automall is one of the leading used vehicle auction platforms based on number of vehicles listed for auction for the financial year 2020.
CarTrade Tech IPO details
|IPO Opening Date||09-Aug-21|
|IPO Closing Date||11-Aug-21|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 10 per equity share|
|IPO Price band||Rs 1585 to Rs 1618 per equity share|
|Lot Size||9 Shares|
|Min Order Quantity||9 Shares|
|Listing at||BSE and NSE|
|Issue Size||Rs 2,998.51 (OFS)|
What are CarTrade Tech Limited competitive strengths?
1) Company is leading marketplace for automotive sales with a Synergistic ecosystem.
2) Its brands and customer experience driving powerful network effects
3) Company with proprietary end-to-end technology platforms
4) Focus on data science to provide superior solutions
5) Profitable and scalable business model
What are the Objects of the Offer?
It has two objects of the offer for the IPO size of Rs 2,998.5 Crores
1) Offer for Sale (OFS) Rs 2,998.5 Crores: Under OFS selling shareholders would sell the shares and company would not get any proceeds from the issue.
2) Achieve the benefits of listing the equity shares on the stock exchanges.
Who is the promoter of CarTrade Tech Limited?
It is a professionally managed company with no identifiable promoters.
How is the company financial track record?
Here are the total assets, revenues and profits of the company in the last 3 years.
|Financial Year ending / Period ending (Amt in Mns)|
|Profit After Tax||259.1||312.9||1,010.7|
Why to invest in CarTrade Tech IPO?
Here are the positive factors in this company.
1) CarTrade Tech Ltd is a multi-channel auto platform provider company with comprehensive range of services like automotive buying, selling, financing and marketing.
2) Company has various well-known brands like CarWale, BikeWale, CarTrade etc. which are profitable and scalable business models.
3) Its margins are stable in the last 3 years. Its FY21 margins are very high at Rs 101 Crores compared to FY20 of Rs 31.2 Crores. This is mainly due to high “deferred tax credit” in FY21 for Rs 63.8 Crores. Since this is one timer and would not get every year, one need to exclude and view the nos whether these are consistent or not. If we normalize this like every year, the margins are stable in the last few years.
Risk Factors in Car Trade Tech IPO
1) Company revenues are fluctuating. Its revenues have declined in FY21 compared to FY20. Its revenues were at Rs 318.4 Crores in FY20 Vs Rs 281.5 Crores in FY21. One of the major reason is due to covid-19 pandemic which has hit several businesses.
2) Company may be adversely affected by general declining in individual car ownership or sudden declines in demand for certain types of vehicles.
3) Covid-19 pandemic has affected the business and it may continue to affect in future pandemics too.
4) They may experience disruptions, failures, or breaches of its technology platforms.
5) Company may be adversely affected by fraudulent behavior of sellers or purchasers of used vehicles listed on its platforms.
6) Company gets traffic from organic search results (like google). If they do not have achieve a high-ranking in-search results or if its App is removed from app stores for any reason, it may affect its business.
7) It owns platforms like CarWale, CarTrade etc., If they fail to provide quality content on such platforms, traffic might reduce and it can affect business.
8) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.
CarTrade Tech IPO dates for subscription, Allotment and Listing
|Finalization of Allotment||17-Aug-21|
|Initiation of Refunds||18-Aug-21|
|Credit to Demat Account||19-Aug-21|
|IPO Shares Listing Date||23-Aug-21|
Is CarTrade Tech IPO Price is underpriced or overpriced?
Its IPO price band is Rs 1,585 to Rs 1,618.
1) On the upper price band of Rs 1,585 and EPS of Rs 19.19 for FY21, the P/E ratio works out to be 84x.
2) If we consider last 3 years weighted average EPS of Rs 11.93, P/E ratio works out to be 135x.
3) Means company is asking for IPO price in the P/E range of 84x to 135x
3) There are no listed peers in this segment, hence we cannot ascertain whether the issue price is underpriced or overpriced. But in general, P/E of 84x to 135x, the issue price seems to be overpriced.
What is CarTrade Tech IPO GMP?
CarTrade Tech IPO GMP is not yet known as we could see any trades happening. GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about IPO price as it is unorganized market.
CarTrade Tech IPO – Review and Recommendation
CarTrade Tech Ltd is a multi-channel auto platform provider company in India which has popular platforms like CarWale, CarTrade, BikeWale etc.
Company revenues are fluctuating. Revenues have declined in FY21 compared to FY20 which can be majorly attributable to covid-19 pandemic.
Company margins are high in FY21 due to one timer. If we exclude them, it posted stable margins in the last 3 years.
The issue price seems to be over priced in general (while there is no listed peers to compare).
Company has unique business model with no listed peers in the market. Covid-19 has impacted its FY21 financials. I would have been excited if the issue price is on the lower side. However, considering future prospect of the company, investors can invest in this company with medium to long term perspective. Since the issue price is high, one may or may not get listing gains.
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