CarTrade Tech - A Multi-Channel Auto Platform

sai_sirish · August 19, 2021, 3:01pm

Hi everyone,

As there is no thread created so far, I’ve decided to make one on CarTrade.

CarTrade Tech Ltd is a multi-channel auto platform provider company. The company operates various brands such as CarWale, CarTrade, Shriram Automall, BikeWale, CarTradeExchange, Adroit Auto, and AutoBiz. The platform connects new and used automobile customers, vehicle dealers, vehicle OEMs, and other businesses to buy and sell different types of vehicles. The company offers a variety of solutions across automotive transactions for buying, selling, marketing, financing, and other activities.

Business and their Brands

1) CarWale and CarTrade

Car shoppers can visit CarWale and CarTrade platforms to research and connect with dealers, OEMs and other partners to sell and buy cars from the large variety of new and used cars offered by them. In addition, they engage in financing and automotive ancillary companies to offer their products and services on CarWale and CarTrade.

2) Bike Wale

Customers looking for new and used two-wheelers can research and connect with dealers, OEMs and other partners on BikeWale to sell and buy two-wheelers from the large variety of new and used two-wheelers offered by them.

3) Shriram Automall

Shriram Automall, facilitates sales of pre-owned cars, two-wheelers, commercial vehicles, four-wheelers, and farm and construction equipment.

4) Adroit Auto

Adroit Auto offers vehicle inspection and valuation services used by insurance companies, banks and other financial institutions.

5) CarTrade Exchange

CarTrade Exchange is an online auction platform and a used vehicle enterprise resource planning tool. It is used by consumers, business sellers, dealers and fleet owners to sell vehicles to automotive dealers and fleet owners. Automotive dealers also use CarTrade Exchange to manage their processes for procurement, inventory management and customer relationship management .

6) Autobiz

AutoBiz provides new car dealers a CRM solution to manage their customers in an efficient manner.

Competitive Strengths

A leading platform for Automotive Sales with a Synergistic Ecosystem.
Strong Brands and Superior Customer Experience Driving Powerful Network Effects
Asset light business model (97% of the auto malls are leased out)
A comprehensive range of services i.e. automotive buying, selling, financing, marketing, etc.
Proprietary End-to-End Technology Platforms
Focus on Data Science to Provide Superior Solutions
Profitable and scalable business

Key Risks

Increase in competition among automotive digital platforms
Investment by OEMs and/or dealers in their own digital platforms
Reduced ownership of vehicles and increasing dependence on ride sharing services
Fraudulent behavior of sellers and buyers who list their vehicles on its platforms
Disruptions, failures or breaches of the technology platforms
Continuing impact of the currently ongoing Pandemic
Theft or damage of vehicles at their auto malls
Dependency on third-party service providers for many aspects of their business
Goodwill is roughly 50% of their current net-worth and maybe impaired due to poor operating results in the future
Inability to acquire, use and maintain its domains and trademarks

Valuation

CarTrade clearly specified that they don’t have an identifiable promoter group. The existing investors have sold 40% of their stake in the IPO.
The valuations are on the higher side, currently priced at 73 PE ( adjusted PE is 270 without the impact of deferred tax credits)

Key Management

Vinay Vinod Sanghi is the Chairman, Managing Director and the Chief Executive Officer of the Company. He was appointed as the Chief Executive Officer of the Company on September 1, 2009. He has previously been associated with Mahindra First Choice Wheels Limited and Project Automobiles (Bombay) Private Limited. He has over 30 years of experience in the automobile industry.

Aneesha Menon is the Executive Director and Chief Financial Officer. She is a Chartered Accountant and has 13 years of experience in the field of Finance. She was previously employed with S.R. Batliboi & Co. LLP (audit member firm of Ernst & Young).

Victor Anthony Perry III is a Non-Executive Director of the Company. He holds BSC. in Civil engineering from the University of Virginia and an MBA from Harvard University. He was previously the president and chief executive officer of TrueCar, Inc.

Investment Thesis

Biggest positive is it is the only company which is profitable in the Auto platform business.
Can dominate in the auto platform business due to the expected growth in the Auto sector in the coming 3-5 years.
It can continue to trade at high valuations due to the nature of platform businesses.

Disc:- Already invested in the company

gnaveen4 · August 20, 2021, 5:24am

It could be an interesting tech platform. Valuations for such PE backed firms doesn’t mean anything. Obviously PE investors after making a lot of money are selling their holding through IPO to retaik investors. Looking at the trends in technology platforms like Cartrade can be hugely successful and topline can continue to grow for many years. Zomato is a case in point, insane valuations - still smart money chasing it. Worth keeping a close watch on Cartrade.This is a profit making company.

sai_sirish · September 10, 2021, 7:57am

There’s not a lot of Financial information available about the company at the moment to make a sound decision.

If you are waiting for results, then you have to wait until Q2 results are released. They won’t be publishing Q1 results.

You can refer this document for the latest financials. https://images.moneycontrol.com/static-mcnews/2021/08/CarTrade-Tech-04-08-21-icici.pdf

Shrayansh_Agrawal · September 11, 2021, 2:29am

Can anyone throw some perspective on chip shortage, semiconductos which are leading the automakers to continue reduce the production of new cars (worldwide).

Since there will be lesser number of new cars and with festival demand ramping up, Used vehicles market seems to have a positive effect.

darkhorse · September 11, 2021, 2:34am

See chip deficit will be covered not before 18 months minimum.

But, only those companies which are cash rich, low debt or not high cost of debt will survive well.

Also these times are greatest opportunity for R&D focused companies to innovate and be ready when auto markets are on full swing.

I see it great opportunity when others see it as Challange.

Ashwani_Agarwal · September 14, 2021, 6:06am

The Company has announced today that they have Launched “CarWale AbSure”. The company is foraying into Physical showrooms, their Experience from Sriram Automalls should help them in this new venture.

My understanding is that having a physical presence is very very important in the Used Car Segment, but the same is capital intensive. Anyways’ this is an exciting new development to keep an eye on.

This is how the company is describing AbSure

“With the brand abSure, we target to touch the entire customer journey of a used car buyer from researching and checking the variety in different offers, exploring the widest range of products online to the point of “touch and feel” at our brand-new showrooms”

Link : abSure - The dawn of a new disruptor - CarWale

sujay85 · September 14, 2021, 7:04am

Sriram Automall is a Physical Showroom, right? So, what is new? Their own branded Physical Showroom?

Fiddly · September 19, 2021, 3:02am

Top Quality Management Now we have to see if they can walk the talk. They are planning to create an ecosystem around buying automobiles be it insurance, finance, or after-sales service.

Indeed an undervalued gem.

Fiddly · September 20, 2021, 2:55am

I think today the lock-in period of QIB investors is ending. Might End up with pretty high selling pressure as free float equity is very high.

Any View on this.

Dev_S · September 20, 2021, 7:09am

Two images - one mgmt is showing vs direct from google trends

Gap is narrowing, esp with Cars24,

Tracking position

darkhorse · September 20, 2021, 9:48am

Around half a Bn USD investment by Tencent and Softbank in Cars24, chip shortage led used cars theme.

Fiddly · September 20, 2021, 11:49pm

Yes Indeed

shubhambhardwaj · September 21, 2021, 1:07am

You should note that these search rises are because of CarTrade listing. People just search to check share Price. For Depth info you can see Alexa Ranking and how it compares with its peers.
I am attaching link if you want to compare Ranking and average Time :-
https://www.alexa.com/siteinfo/cartrade.com
https://www.alexa.com/siteinfo/cars24.com
https://www.alexa.com/siteinfo/cardekho.com

I have found that cars24 and carDekho is more popular. CarDekho has a youtube channel also for reviews. They have built a strong community of their own which others have not.

Aniesh7 · September 21, 2021, 2:21am

sai_sirish · September 21, 2021, 12:05pm

Both the businesses are slightly different from each other as said by CarTrade management in the webinar. Even the way they account for the revenue is different from what Cars24 does.

CarTrade follows net basis and Cars24 follows gross basis (management understanding). And CarTrade business model is somewhat more diversified than Cars24.

ValueV · September 22, 2021, 7:08pm

Dev_S · September 25, 2021, 7:40am

Key for us is to understand future trajectory of company and industry.

From above article–
Here is the secret sauce for much talked about profitability aspect of Cartrade

Advertising has come down to half at 4% ftom 8% in previous year, and they intend to keep it low
CAC cost is at 2.33 for 9 months in FY 20, remarkable improvements from 10.88 in previous year

A company will not do above until they are confident of sustainability of the traffic. Their claims of 88% organic traffic - to check this claim, below provides data( performed gor only carwale vs cars24)

Across all digital channels ( not just google) , they seem to be doing well compared to competitors and has huge gap with 9X traffic, this is increasing even after cartrade reduced mktg spend

Looking at their keywords spend vs Cars 24( for both 80% traffic is search)

carwale has 96.33% organic searches and 3.67% paid
cars 24 has 78% organic and 22% paid searches

Summary - carwale has 9X traffic, widening gap, lesser mktg spend at 2.33 per customer acquisition cost( my guess is this is greater than 10 for cars24 as was the case for cartrade before reducing spends) - all we need is increase in top line and operating leverage levers could continue to deliver non linear EBDITA and bottomline growth given fixed cost doesn’t grow much.

Investment thesis

As long as one believes in Digital and organized players taking market share from unorganized players theme( cartrade and all organized player together are lesser than 5% of total market share hence huge scope for all players,), used car industry itself will grow at low mid teen digit and organized players at much higher
those who has reached inflection point, sustainability of organic traffic will grow profitably and with network effect helping players like cartrade, looking at traffic and marketing spends, reason to believe it tilts in favor of cartrade. Still would like to see coming quarter performance.
Capital allocation - mgmt interviews gives data points of humble beginning, very efficient acquisition of carwale and bike wale assets, omni channel play with Shriram automall acquisition ( asset light model), so far it has been good track record
optionality- have multiple revenue streams, - commissions, ad spend, data analytics, valuation etc.

Invested in tracking qty, plan to increase allocation

sai_sirish · September 30, 2021, 5:40pm

Might benefit the used car sector in the next month.