CarTrade Tech IPO Financial Analysis (Subscribe)

Brief Business Highlights

CarTrade Tech is a multi-channel auto platform with coverage and presence across vehicle types and value-added services The company offers a variety of solutions across the automotive transaction value chain for marketing, buying, selling, and financing new and pre-owned cars, two-wheelers as well as pre-owned commercial vehicles and farm and construction equipment.
The online platforms are CarWale and CarTrade, Bike Wale, Shriram Automall (subsidiary), CarTrade Exchange, Adroit Auto, AutoBiz. Diversity and the number of users across all the platforms provide value to the buyers and sellers and creates a network effect across businesses.
Well Positioned to Benefit from Growth of the Automotive Sector and Digitalization- Though the automotive sector is under pressure due to the pandemic effects on its sales growth in the sector is expected as people opt more for personal vehicles to reduce their use of public transport in the near future. In addition, according to the RedSeer report, more than 90% of customers in India use online channels for research before buying a new or used car, with online platforms being rated higher than offline platforms in terms of quality and trust.

Car Trade Tech Financial Review

Total revenues have reduced by 11.60% in FY21 to Rs 281.52 crore from Rs 318.45 crore in FY20. This decrease was due to the pandemic effect. The total revenues were Rs 266.81 crore during FY19. CarTrade Tech posted an adjusted PAT of Rs 37 crore in FY21 as against Rs 31 crore in FY20. The Issuer has strong EBITDA margins of 25% in FY21 and reasonable net margins being 10% on an average for the last three fiscals.
Debt to equity is 0.06 as of 31st March 2021. Return on net worth has been 3.52% (weighted average of last three fiscals)

Table 1 - Financials and Ratios (Amount in INR Crore)
Particulars	FY21	FY20	FY19
Total Revenue	281.52	318.45	266.81
PAT	37.20	31.29	25.92
EBITDA	71.21	59.79	53.03
Total Assets	1930.2	1470.4	1427.09
Cash and Bank	24.48	21.59	21.63
Cash generated from operations	35.21	17.16	35.2
EBITDA Margin	25.29%	18.78%	19.88%
Net Margin	13.21%	9.83%	9.71%

Valuation and Peer Comparison

With an EPS of 22.06 per share, the Issue is priced at 73.35x calculated at a higher price band of Rs 1618. If the company’s adjusted profits are considered for P/E, the pricing of the issue would be much higher. Hence, the valuations of the company seem to be stretched. P/BV is 4.12 at NAV of 392.83 per share.

The company has no listed peers as per the RHP. In the unlisted space, Cars 24, CarDekho, Mahindra First Choice, and Droom are the unlisted peers. It is to be noted that amongst its peers only CarTrade Tech is a profitable company. The Issuer became profitable in the year 2019.

Conclusion

CarTrade Tech operates on an asset-light business model and uses technology for its online platforms. The platforms have seen a strong organic growth (88.14% are organic visitors on its online platforms) as cited. The financial performance of the Issuer is reasonable though it needs to be tracked for the upcoming quarters as well since the revenues have reduced in FY21. The pricing of the Issue is expensive but it being the only profitable player in the digital space is positive. Hence Investors may subscribe to the Issue.

Reviewer recommends Subscribe to the issue.

Review By CA Priyanka Choudhary on 28th Jul 2021

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.