Grey market watchers noted that the unlisted stock had once hit a grey market premium (GMP) of Rs 600, but tepid listings for a few debutants and weak trends in the broader markets have hurt investor sentiment.
Abhay Doshi, Founder at Unlisted Arena, said the issue was deemed expensive even at the IPO price band, something which brokerages also pointed out in their IPO notes. “The broader market pain, hidden by record high levels for benchmark indices, is weighing on the sentiment. On the other hand, most of the recent IPOs were aggressively price and a few of them have now seen muted listings,” Doshi said.
Santosh Meena, Head of Research at Swastika said that retail investors’ interest had come down significantly amid a correction in midcap and smallcap pockets. The major disappointing factor from CarTrade IPO was it was purely an OFS and, thus, no money will go into business for future expansion, even as high competition and low entry barriers are some risks to the company, Meena said.
Data showed retail quota for CarTrade IPO was subscribed mere 2.75 times against non institutional investors’ (41 times) and qualified institutional buyers’ 35.45 times that subscribed to the issue.
“With the market being interested in new edge technology stocks and anchor book and HNIs subscription numbers came in decent for this issue, we can expect a listing gain of around 10-15 per cent. But we advise only aggressive investors to hold this stock for the long term,” he said.
The issue, which was sold in Rs 1,585-1,618 price band was subscribed 20.29 times. At the issue price, the stock would be available 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 valuations of the company seem to be stretched, Arihant Capital had said in its IPO note. This brokerage had advised investors to subscribe to the issue for listing gains. “Long-term investors are recommended to buy the stock on dips post listing,” it had said.
CarTrade is a multi-channel auto platform with coverage and presence across vehicle types and value-added services through its brands — CarWale, CarTrade, Shriram Automall, BikeWale, CarTradeExchange, Adroit Auto, and AutoBiz.
The CarTrade platforms allow customers to buy and sell used cars as well as new cars. Founded in 2009, it is backed by marquee investors such as Warburg Pincus, Temasek, JPMorgan and March Capital.
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).
