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CarTrade Tech Ltd (CTTL), incorporated in 2000, is a web/app based multichannel auto platform provider. The company operates a number of online platforms such as CarWale, CarTrade, Shriram Automall, BikeWale, CarTradeExchange, Adroit Auto, and AutoBiz. CTTL has created an automotive digital ecosystem that connects new and used automobile customers, vehicle dealers, OEMs, financers, insurance companies and other businesses, enabling them to offer their services for different types of vehicles (cars, 2Ws, CVs, tractors & construction equipment).

According to Frost & Sullivan, the used car market in India stood at 3.8-4.0 mn units annually, making it 1.5X bigger than the 2.6-3.0 mn unit of new car market, compared to 2.8X in the USA and 4.1X in Europe. The volumes in both the segments, used & new cars, are set to rise in India by more than 10% CAGR in the next 5 years. The worldwide shortage of chips and semiconductors has not only delayed production schedules of new vehicles, but also resulted in a sharp price rise. With this situation unlikely to improve for the next 1 year, the used car market is expected to remain buoyed. Earlier the used car market was unstructured, however with the entry of organized players, people are shifting towards branded resellers due to

* Variety of vehicles and brands they offer

* Quality assurance of vehicles

* One stop solution for financing and insurance

CTTL has an advanced and sophisticated online platform, which operates on an integrated technology infrastructure, handled by 221 technical employees working at 3 technology centers. During FY19-21, CTTL’s online platforms reported 15.4% CAGR growth in average monthly unique visitors to 25.66 mn. It has been ranked No.1 on relative online search popularity compared to key competitors, such as Droom, Cars24, CarDekho, etc. Over the same period, despite the pandemic, the number of vehicles listed for auction or sale on CTTL’s platform grew at a CAGR of 7.2% to 8,14,316 units. Besides, CTTL has accumulated a large data set, which it could leverage to enhance its offerings in new segments of the automotive space.

CTTL is the only profitable digital auto platform. It has already invested well in technology and thus require very limited additional capex. Over the period of FY19-21, revenue grew at a CAGR of 1.3% to INR 250 cr, while EBITDA and adjusted PAT grew faster at a CAGR of 15.5% to INR 39 cr and 22.4% to INR 37 cr, respectively. EBITDA and adj PAT margins improved to 15.8% (+364bps) and 14.9% (+468bps), respectively, over the last 3 years. As a result, return ratios, RoE and RoIC also improved to 2.2% (+20bps) and 1.3% (+23bps), respectively.

The management is planning to enhance its app-based offerings by adding new services for automotive accessories, servicing of vehicles and underwriting (for insurance & financing) in the coming years.

Valuation

At the upper price band of INR 1,618 per share, CTTL’s valuation stands at 199 X FY24 adj P/E (adjusted for deferred tax gain in FY21).

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