The owner of platforms such as CarWale, CarTrade, BikeWale and AutoBiz has a dozen brokerages recommending ‘subscribe’ ratings to the ‘exorbitantly’ priced issue, with some suggesting subscribing to it for listing gains while others seeing it worthy of medium to long-term investment.
“Valuations of the company seem to be stretched,” said
, which said investors should subscribe to the issue for listing gains. “Long-term investors are recommended to buy the stock on dips post listing,” it said.
The issue will entirely be an offer for sale (OFS) of up to 1,85,32,216 shares by a few existing shareholders and would be sold in the Rs 1,585-1,618 price band. At the upper end of the price band, the IPO is offered at 4.4 times price-to-book value (P/BV) and 29.6 times (EV/sales) and 73.4 times price to earnings (P/E).
“If one excludes accounting adjustments for deferred tax and attributes it to equity, the asking price is at a P/E of around 199.26 times to its FY21 earnings with a market cap of Rs 74,15.95 crore, which shows the issue is priced exorbitantly,” said Anand Rathi.
“However, considering the future prospects of the company and the fact that it is in a sweet spot with the first-mover advantage, we assign ‘subscribe’ rating to the IPO. One can invest in this IPO from a medium- to long-term perspective,” the brokerage said.
ICICIdirect said the company offers a unique play on the rising digitisation of new and pre-owned vehicle transaction value chain. Given the prevailing preference for ‘digital platforms, including the recent listings’, it assigned a ‘subscribe’ rating to the issue for listing gains.
“The company’s long-term wealth creation will be a function of scalability, relevance and its journey towards healthier return ratios,” it said.
CarTrade’s platforms such as CarWale and CarTrade offer customers to research and connect with dealers and OEMs. They also engage with financing and automotive ancillary companies to offer products and services on the portals.
Another subsidiary, Shriram Automall, facilitates sale of pre-owned cars, two-wheelers, commercial vehicles, three-wheelers, and farm and construction equipment. CarTrade Exchange is an online auction platform and an used vehicle enterprise resource planning tool. Adroit Auto offers vehicle inspection and valuation services, while AutoBiz provides new car dealers a CRM solution to manage their customers.
The company’s financials were hit in FY21 with sales falling 16 per cent YoY to Rs 249.68 crore from Rs 249.68 crore in FY20. Profit jumped to Rs 101.07 crore (largely led by Rs 54.10 crore in taxes) from Rs 31.29 crore profit in FY20. That said, it is the only profitable online automotive portal. The company is debt free and has a history of generating positive free cash flows (FCFs).
CarTrade Tech had 2.6 crore monthly average unique visitors on its websites and apps in FY21, of which 88.4 per cent were organic, from unpaid sources. It featured 8.14 lakh vehicle listings on its online and offline auction platforms. As of FY20, the total addressable market for Indian automotive portals was estimated at $14.3 billion, of which CarTrade and its key competitors together held 5 per cent market share.
Amarjeet Maurya, AVP for Midcaps at Angel Broking, said the post-issue FY2021 P/E works out to 73.4 times and there are no listed peers for comparison.
“However, the company is doing better compared with its unlisted peers in terms of financial. We believe it has a strong brand, better technology platforms, a profitable and scalable business model. Hence, we recommend a ‘subscribe’ rating to the issue,” he said.
Nirmal Bang Institutional Equities did not rate the company. It said while it is positive on the growth prospects of CarTrade due to large addressable market, there is a cyclicality element involved in the business.
