CarTrade Tech Limited saw its initial public offering open on Monday. The Issue saw an overall subscription by the investors. The CarTrade Tech IPO was subscribed a total of 0.41 times on the first day of the issue opening. It was subscribed 0.80 times in the retail investor category. The qualified institutional buyers (QIBs) and the non-institutional investors (NIIs) had subscribed to the issue 0.01 times and 0.03 times respectively on day one. While the retail investors took up 80 per cent of their reserved portion, the NIIs had bid for 91,800 equity shares against their reserved portion of 27.79 lakh shares. At the end of the day, the investors had bid for 53 lakh equity shares against an IPO size of 1.29 crore equity shares.
CarTrade Tech had reduced its offer size to 1.29 crore shares from the initial 1.85 crore shares. This comes in light of the funds that the company managed to raise around Rs 900 crore from its anchor investors on August 6, before the issue opened. The public issue opened for subscription on August 9 and plans to close on August 11.
The QIBs had a reservation of 50 per cent for the issue. The NIIs on the other hand had a reservation of 15 per cent. Meanwhile, the individual retail buyers had a 35 per cent reservation of shares for the issue. The public issue also had a minimum lot size of nine shares that come with an accompanying Rs 14,562 as the application amount. On the higher end, there are 117 shares with a maximum amount of Rs 189,306 as the application amount. Retail investors were allowed to apply for up to 13 lots on the higher end of the lot size.
The CarTrade Tech IPO has an issue size of Rs 2,998.51 and it consisted entirely of an offer for sale (OFS) of the same value. The issue carried with it 18,532,216 shares with a face value of Rs 10 per equity share. The price band of the IPO was Rs 1,585 to Rs 1,618 per equity share.
The grey market premium of the public issue stood at Rs 400 on August 10. This indicated that the shares were trading at a premium of Rs 1,985 to Rs 2,018 per equity share on the unlisted grey market.
Should you Subscribe to the CarTrade Tech IPO?
Speaking on CarTrade Tech’s business model, ICICI Direct said in a note, “CTT enjoys high brand visibility and affinity, as evidenced by 88% of FY21 unique visitors being organic (unpaid). Pursuant to its asset-light business model (111 out of 114 automalls are leased), controlled employee costs and low balance sheet risk due to minimal carried inventory (unlike some competitors), CTT was the only profitable automotive digital platform among its key peer set as of FY20. On the b/s front, it is a net cash positive company with surplus cash amounting to Rs. 650 crore as of FY21.”
There are certain risks that come with the issue and the company. One such concern is the investment by OEMs and dealers in their own digital platforms. There is also the matter of cybersecurity risk as is with any online or digital medium. Apart from those factors, there is also the matter of muted capital efficiency as a result of goodwill on b/s which is 50 per cent of the net worth.
Having said that, CarTrade Tech did see its revenue grow at a CAGR of 1.3 per cent during the period of FY19-21. Parallelly, Its EBITDA also saw some growth for the same period by a CAGR of 15.5 per cent. Over the period of FY19-21, the company saw its profits climb by 133.8 per cent.
Adding to the outlook for the issue and whether or not one should subscribe to it, ICICI said, “CTT offers a unique play on rising digitisation of new and pre-owned vehicle transaction value chain/ecosystem. Given the prevailing preference for digital platforms including the recent listings, we assign SUBSCRIBE rating to the issue for listing gains.”
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