Reduce Cartrade Tech Ltd For Target Rs. 2,820 By JM Financial Services
Media reports suggesting acquisition of CarDekho
As per media reports, CarTrade is in advanced stages of acquiring CarDekho. If it goes through, this could create the country’s largest auto-tech platform with almost a monopolistic position across New Auto as well as Used Auto. CarDekho group currently houses New Auto and Rupyy (Lending platform for auto loans) as fully owned businesses along with majority ownership of InsuranceDekho and OTO (Southeast Asia business). Considering the size of CarDekho group (last valuation of USD 1.2bn) and minimal overlap with CarTrade’s business segments, we believe any acquisition would only include the fully owned New Auto business. Furthermore, as per our maths in Exhibit 1, it is likely to command a valuation of INR 61bn+ and a deal closure below this would make it highly accretive for CarTrade shareholders.
* What is likely to be acquired?: CarDekho has business presence in New Auto via CarDekho, Zigwheels, BikeDekho and Powerdrift. Across these platforms, our industry connects suggest the company did a revenue of c.INR 3bn at 33% EBITDA margin in FY25. While CarDekho portal used to be the largest India auto portal by traffic, it has conceded the position to Carwale over the past few years and hence could also be losing revenue market share. CarTrade management did highlight the market share gains over the recent earnings call. We believe CarDekho to still be larger than CarTrade’s New Auto segment in FY26 even after assuming 20% lower growth and generate similar absolute EBITDA without assuming any margin expansion.
* Why would the deal happen?: From CarTrade’s perspective, we find the rationale to be simple – opportunity to create an even larger auto-tech platform and gain substantial revenue with significant cost synergies. From CarDekho’s perspective, this deal might make sense considering the immediate liquidity it provides to its shareholders. With the first institutional fundraise happening in 2013 followed by larger rounds in 2015 and 2019, there could be a certain pressure to generate liquidity for existing investors. While the company did finalise IPO bankers early this year, we have not seen any further updates considering DRHP filing was anticipated in 1H25. This could enable the needed liquidity to these early investors.
* How will the deal happen?: As highlighted in Exhibit 1, we anticipate any acquisition of CarDekho’s New Auto business to require c. INR 61bn. Considering CarTrade currently has INR 10.8bn in cash on balance sheet, we believe this acquisition would require additional fundraise. There also remains the possibility of a debt raise considering the high cash generation that the acquired entity is likely to deliver. However, the acquisition would still be a mix of cash and share swap considering the large size of the transaction. Having an equity component could also be attractive for CarDekho’s shareholders as they might be leaving money on the table if the transaction goes through for an amount lower than INR 61bn.
* What it means for CarTrade’s business operations?: Our estimates suggest the two leading vertical platforms garner 18-20% market share of Indian Auto’s digital advertising pool. Furthermore, a combined CarTrade and CarDekho could substantially enhance the pricing power that the two platforms could exercise individually. However, the consolidated nature of New Auto industry in India where a few OEMs account for a disproportionate market share could still make any price hikes tougher to execute. We still remain positive considering the demandstarved nature of Indian Auto and vertical platforms remaining one of the most efficient sources of demand generation
* What it means for CarTrade’s shareholders?: While CarTrade has seen a strong stock performance in 2025, we believe this acquisition at an attractive valuation could drive substantial accretion on earnings despite the likely dilution it entails. Assuming an acquisition value of INR 61bn and the fact that it is at c.25% discount to the multiples being reflected at CMP, CarTrade shareholders could be looking at INR 20bn of value creation immediately upon acquisition without even assuming and revenue or cost synergies.
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