The issue is an offer for sale (OFS) of up to 1,85,32,216 shares by existing shareholders, being sold in the Rs 1,585-1,618 price band. At the upper end of the price band, the IPO is offered at 73.4 times price to earnings (P/E), 29.6 times (EV/sales), and 4.4 times price to book value (P/BV).
The company has no listed peers in India.
“At a higher price band of Rs 1,618, CarTrade’s demanding EV/sales looks attractive, considering its scalable business model, profitable operations, and business growth opportunities in the auto sector value chain,” said Choice Broking, while suggesting a ‘subscribe’ to the issue.
The company has raised Rs 900 crore from anchor investors, ahead of its offering.
The valuations of the company seem to be stretched, said
, while suggesting investors to subscribe the issue for listing gains. “Long-term investors are recommended to buy the stock on dips post listing,” it said.
Anand Rathi said that 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 its FY21 earnings with a market cap of Rs 74,15.95 crore, which shows the IPO is priced exorbitantly.
“However, considering the future prospect of the company and the fact that it is also placed at a sweet spot as the first-mover advantage, we assign a “subscribe” rating to the IPO. Investors can invest in this company with a medium- to long-term perspective,” the brokerage said.
ICICI Direct 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 subscribe rating to the issue for listing gains, adding that, “long-term wealth generation at the company will be a function of scalability, relevance, and journey towards healthier return ratios,”.
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) compared with 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’s platforms such as CarWale and CarTrade platforms 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 sales of pre-owned cars, two-wheelers, commercial vehicles, three-wheelers, and farm and construction equipment. CarTrade Exchange is an online auction platform and a 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.
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 or from unpaid sources. It featured 8.14 lakh vehicle listings on its online and offline auction platforms. As of FY20, total addressable market for Indian automotive portals was estimated at $14.3 billion, of which CarTrade and its key competitors together covered only 5 per cent of the market.
Amarjeet Maurya – AVP – Mid Caps, Angel Broking said that the post-issue FY2021 PE works out 73.4 times and that there are no listed peers for comparison.
“However, the company is doing better compared to unlisted peers in terms of financial. We believe the company has a strong brand, better technology platforms, a profitable and scalable business model. Hence, we recommend a subscribe rating on 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 the large addressable market, it took cognizance of the cyclicality element involved in the business.
