The stock touched a high and a low of ₹1610 and ₹1476 respectively intraday.
“We have to see how the CarTrade IPO will perform because retail investors’ interest has come down significantly amid a correction in midcap and small-cap space but we saw decent subscription numbers by HNIs on the last day,” an analyst said on a condition of anonymity.
“The major disappointing factor from CarTrade was that its IPO was 100% OFS, therefore no money will go into business for future expansion while high competition and low entry barriers are other risk factors. As the market is interested in new edge technology stocks whereas anchor book and HNIs subscription were decent for the CarTrade IPO. we advise only aggressive investors to hold this company for the long term,” the analyst added.
The firm turned profitable in FY19 and is the only profitable automotive digital platform for FY20 among key competitors in India. It operates on an asset-light business model, has invested significantly in building tech platforms that can manage higher traffic & offerings without requiring meaningful additional investments, and the growing scale has resulted in a decrease of the share of fixed costs. Strong brands have helped reduce spends on Advertisements – aiding margins, analysts say.
“At the upper end of the IPO price band, it is offered at 4.4x P/BV and 29.6x EV/Sales and 73.4x P/E if we exclude accounting adjustments for deferred tax and attribute it on equity, then the asking price is at a P/E of around 199.26x to its FY21 earnings with a market cap of Rs.74,159.5 million which shows the issue is priced exorbitantly. However, considering the future prospect of the company, it is also placed at a sweet spot as the first mover advantage”, said Anand Rathi in a note to its investors.
CarTrade, which helps users find used as well as new cars, is backed by American private equity giant Warburg Pincus, Singapore’s state investor Temasek, JPMorgan and March Capital Partners.
The IPO consisted of a pure offer for sale of 18.53 million shares by its existing shareholders and promoters. It comprises 2.26 million shares by CMDB II, u pto 8.41 million shares by Highdell Investment, u pto 5.08 million shares by Macrithie Investments Pte, up to 1.77 million shares by Springfield Venture International and 1.83 lakh shares by Bina Vinod Sanghi.
“The flat listing (currently at 4% discount) of CarTrade comes as no surprise. In the past 3 years, Revenue and EBITDA of the company hasn’t grown meaningfully. PAT jumped this year only because of a tax credit,” said Aditya Kondawar, COO, JST Investments.
Investors should know that in IPO bull runs, companies come at really high valuations and justify it with narratives. “Stay cautious and do your research and don’t rely on meaningless metrics such as GMP,” he said.
The article was first published on livemint.com