In the dynamic world of investments, the question that often arises is whether to invest in a newly launched Initial Public Offering (IPO) or not. Today, the spotlight is on Car Trade’s IPO, but tomorrow, a new opportunity may emerge. The key lies in knowing what to look for before making an investment decision. By grasping these fundamental principles, you can confidently navigate the IPO market and make informed choices independently.
Before delving into specific investments, it’s imperative to comprehend the business model of the company. This transcends the allure of quick listing gains; it’s about recognizing the potential for sustained growth. The essence of a sound business model lies in its ability to weather market fluctuations and generate long-term returns.
Let’s begin by understanding the psychology of individuals in the context of Car Trade’s business model. Picture this scenario: a common individual brings in a car valued at 10 lakhs. Over the course of several years, they drive it, until eventually, the urge for an upgrade surfaces. Car Trade steps in, offering to facilitate the exchange of the old car for a newer model, with a monetary consideration in between. But what happens to the old car?
Typically, it finds its way to the market for resale. Here, the dynamics shift. That 10-lakh car, after five years, might be sold for 4 lakhs. The original owner parts ways with it, satisfied with their usage. However, in the market, the same car could fetch a higher price, perhaps 5 or 6 lakhs. Dealers come into play, often acting as intermediaries between the original owner and potential buyers.
Dealers, too, play a strategic role. Upon acquisition, they evaluate the car’s condition, capturing images for online listings. Then, an auction ensues, with dealers bidding for the vehicle. This marks the initiation of the car trade process, with Car Trade being one of the prominent platforms for such transactions.
Here’s where the Car Trade shines. While owners could directly sell to dealers, the decision to leverage platforms like Car Trade proves more lucrative. By tapping into the online market, a broader audience is reached, enhancing the likelihood of a successful sale. Competitors such as Cars24, Droom, and even OLX are part of the landscape, but Car Trade’s position remains notable.
This traffic flow to online platforms is where the profitability factor comes into play. Dealers, in partnership with these platforms, pay a commission for access to potential buyers. This revenue stream, akin to Zomato’s commission model, contributes significantly to the platform’s profitability.
It’s important to note that not all platforms boost profitability. Car Trade, however, stands out as a prime example of a profitable venture in this domain. The success is underpinned by a savvy understanding of consumer behavior, strategic dealer partnerships, and a robust online presence.
In recent times, the used car market has witnessed a surge in popularity, with platforms like CarTrade leading the way. The question arises: Why are some similar businesses not as profitable? The answer lies in the unique business model adopted by CarTrade.
At the core of CarTrade’s success is its platform, where dealers can list their cars, and run their own ads. Comparable businesses like Housing.com, Magic Bricks, and 99ecard operate on a similar principle. They act as intermediaries, connecting buyers and sellers in the real estate market without directly owning the properties.
CarTrade’s revenue primarily stems from commissions and fees charged to dealers, constituting a significant 57% of their profits. This online listing service provides a crucial online space for dealers, facilitating transactions. Moreover, a noteworthy 88% of CarTrade’s impressive monthly footfall of over 32 million users is organic traffic, a substantial achievement in the online marketplace.
One key aspect of evaluating a business is examining its entry barrier. While the car trade industry currently thrives, the potential for future competition remains, as the entry barrier is not insurmountable. Large corporations entering the market could potentially disrupt the status quo.
However, CarTrade’s formidable organic traffic volume could serve as a safeguard against market fluctuations. If the company can maintain this organic traffic without heavy reliance on advertising expenditure, sustained sales are likely. Consequently, the revenue from dealer commissions and fees would remain a cornerstone of the company’s earnings.
Now, let’s delve into the financials. In 2019, CarTrade’s assets were valued at an impressive 14,270 crore rupees. The subsequent years saw steady growth, with figures rising to 14,704 crore rupees. While revenue saw a slight dip in 2020, it rebounded in 2021 to cross the 3,000 crore rupee mark, signifying a healthy revenue stream. Notably, the profit after tax for 2021 stood at 100 crore rupees, marking a significant increase.
However, some observers have raised questions regarding this rapid profit surge. Was it an organic growth or a strategic move to enhance the IPO’s appeal? The company’s turnover remained consistent, yet profits soared. This aspect warrants careful consideration.
Speaking of IPOs, CarTrade is currently live, having opened on August 9th and scheduled to close on August 11th. With a face value of 10 rupees per equity share, the IPO is priced between 1585 and 1618 rupees. A market lot comprises 9 shares, necessitating an investment of approximately 14,600 rupees at the cut-off price.
The total issue size stands at an impressive 3000 crore rupees, indicating substantial investor interest. However, as of now, the IPO has not been oversubscribed. The subscription rates for Non-Institutional Investors (NII), Retail Individual Investors (RII), and Qualified Institutional Buyers (QIB) are currently below expectations.
For those eyeing potential listing gains, it’s essential to manage expectations. While CarTrade’s IPO presents an enticing opportunity, the likelihood of significant listing gains may be limited, potentially hovering around 30%.
Investing in an IPO demands a realistic approach. While a sudden doubling of your money is improbable, experts project gains of up to 30%. Your success, to some extent, hinges on fortune. So, how do you dive into this opportunity?
First, ensure you have a Demat account, a prerequisite for IPO investments. Open one on Upstox if you haven’t already. Once set up, launch the Upstox app. For those without an account, find the link in the comments to get started.
Now, the pivotal question is – will I invest in the CarTrade IPO? The answer is a resounding yes, and I’ll demonstrate the process. Click ‘Invest’, and you’ll find the ongoing IPOs. Select ‘View ongoing IPO’, and there it is – CarTrade Tech Limited, right at the top.
Choosing an individual category is the next step. Consider going for a single lot, as multiple lots often yield lower success rates. Stick to the cut-off price of £16.18, which totals around £14,000 per lot.
Payment is straightforward through UPI. Once processed, switch to your UPI application to approve the transaction. If successful, the bid amount is deducted; otherwise, it’s temporarily frozen, and ready for refund.
Confirmation reveals a total of £14,562, a slight variance from the anticipated £14,600. A final click on ‘Confirm and continue’ and a visit to your UPI app for acceptance wrap up the process.
Remember, not every application leads to shares due to the lottery system. However, history favors IPOs, with most witnessing substantial listing gains. Even a 20-30% return in a short span is commendable. For more insights, subscribe or follow. Share this guide with those eyeing the CarTrade IPO. Best of luck, and may your investments flourish.