Indian automobile marketplace CarTrade, which opened its initial public offering with a weak response from investors earlier this week, has been subscribed 20.29 times on the final day of bidding.
The retail portion was booked 2.74 times, whereas qualified institutional buyers and non-institutional investors subscribed 35.45 and 41 times, respectively. The first two days of CarTrade’s IPO was subscribed only 0.41 and 0.99 times on day one and two, respectively. Warburg Pincus and Temasek-backed company gained momentum on the third day of subscription. Overall, the company has garnered bids for 263 million equity shares against an IPO size of 12.9 million equity shares.
CarTrade raised INR 9 billion (USD 120.9 million) from anchor investors a day before the issue opened, after which it reduced the offer size to 12.9 million shares from earlier 18.5 million shares. The company set a price band for the offer at INR 1,585–1,618 a share.
Through the issue, which is a complete offer for sale by existing investors and shareholders, the company plans to raise INR 29.9 billion (USD 403 million). Those who are selling their stake include marquee investors Warburg Pincus LLC (Highdell Investment Ltd), Temasek (MacRitchie Investments Pte Ltd), JP Morgan (CMDB II), and March Capital (Springfield Venture International). CarTrade’s founder and promoter Vinay Sanghi and his family members will also sell off a portion of their stakes.
This means listing its shares on India’s bourses will not lead to any fundraise for CarTrade, instead, it will give exit to its existing backers.
“The entire proceeds from the fund raised in the IPO is going to provide an exit to founder and institutional investors,” Abhishek Agarwal, managing partner, Rockstud Capital told KrASIA. He believes a public issue where founders take an exit is a common concept in the developed markets like the US, where the companies are mostly run by professional management, but it may be too early to accept it in India.
Although CarTrade received a good response from investors overall, it didn’t generate as much buzz among retail investors as Zomato, for which the retail portion was subscribed 7.75 times.
“Compared to Zomato and Paytm, CarTrade operates in a very competitive market and that too with limited services for day to day life of customers. Zomato and Paytm are market leaders of their respective industries and their services are used by the mass population. Hence both these brands have high acceptability among retail investors,” Amit Jain, chief strategist of Ashika Group, and co-founder of Ashika Wealth Advisory, told KrASIA.
Founded in 2009 by Vinay Sanghi, former CEO of Mahindra First Choice, and Rajan Mehra, former country head of eBay India, CarTrade lets consumers buy and sell old two-wheelers and cars as well as purchase new vehicles. Apart from this, it also allows users to participate in online auctions of used vehicles. It works directly with OEMs (original equipment manufacturers) and other stakeholders in the auto industry to let them sell vehicle spare parts. It operates separate platforms for each offering such as CarWale, BikeWale, CarTrade, Shriram Automall, CarTrade Exchange, Adroit Auto, and AutoBiz.
“CarTrade enables new and used automobile customers, vehicle dealerships, vehicle OEMs, and other businesses to buy and sell their vehicles in a simple and efficient manner,” said brokerage firm Nirmal Bang in a note.”Its vision is to create an automotive digital ecosystem which connects automobile customers, OEMs, dealers, banks, insurance companies, and other stakeholders.”
The brokerage firm noted that CarTrade is the only profitable player in India and one of the few players internationally in the vehicle platform space.
“Further, with a war-chest of INR 6.68 billion in the balance sheet, CarTrade is well-positioned and plans to capture adjacent business opportunities such as insurance, financing, servicing of vehicles, accessories, and refurbishment cum sale of cars,” it added.