Loss-making Cars24 is worth more than a profitable CarTrade — here’s why
- Cars24 has raised a funding of $258.6 million from eight marquee investors of the startup ecosystem.
- It is reportedly valued at $1.75 billion, followed by Droom with a $1.2 billion valuation.
- CarTrade, despite being profitable, has not been able to cross the billion dollar mark.
Analysts say this could have to do with who’s investing in both companies and the latter’s international presence. Nearly three weeks after its listing, CarTrade remains an underperformer even in the stock market whereas, last week, Cars24 raised more funding and raised its valuation to somewhere between $1.72 billion to $1.75 billion.
On September 10, eight marquee investors of the startup ecosystem pumped in $258.6 million into Cars24, which had turned into a unicorn last year in November, after raising $200 million in a round led by DST Global. A unicorn, in startup purlance, is a company valued over a billion dollars. Cars24 was the first startup to cross the threshold in this segment of its operation.
It is followed by Droom, which was recently valued at $1.2 billion. Meanwhile, CarDekho is in advanced stages of talks to close a funding round with over $1 billion valuation.
These were the investors who bet big bucks in Car24’s latest round.
|DST Asia||$75 million|
|Alpha Wave Incubation||$75 million|
|Moore Strategic Partners||$22.7 million|
|Exor Seeds||$8.3 million|
|HPS Investment Partners’ CEO Scott Kapnick||$2.2 million|
|BloombergSen Investment Partners||$472K|
“Analysts in the public market are far more stringent on how they value and give recommendations for buy or sell, because they are answerable to the public.. On the private side, valuation is an outcome of what an incoming institutional investor thinks the company is going to be worth…” Khatter added.
Ankur Bansal, co-founder of investment firm BlackSoil noted that the difference in revenue and scale of the companies has also resulted in the difference of valuations. However, valuations of public listed companies are considered as a benchmark because each analyst or firm can have different methods to value a business.
|Revenue (in FY20)||₹318.4 crore||₹3,059 crore|
|Profit after tax/(Loss) (FY20)||₹31.2 crore||(₹277.18 crore)|
|Countries||India||India, Australia, UAE|
Founded by Vikram Chopra, Gajendra Jangid, Ruchit Agarwal and Mehul Agrawal, Cars24 allows customers to sell their old cars through their omnichannel network. A consumer can simply book an appointment with any of the Cars24 branches, visit the branch and sell a car in a single visit. The company has recently expanded to Australia and UAE.
AdvantEdge’ Khatter also noted that these two businesses, Cars24 and CarTrade, may look similar on the outside but are in fact very different at their core which has led to difference in the valuation.
The whole reason why CarTrade is profitable is because of Carwale, but again it's a classification that allows you to compare prices. The other two businesses are profitable too, but don’t generate a lot of revenue, Khatter said. “They are market leaders in all these spaces, but the problem with market leaders is that there is not much room to grow,” he said.
|New automobile sales||Yes||No|
|Used car sales||Yes||Yes|
|Commercial vehicles, farm and construction equipment||Yes||No|
|Online auction platform||Yes||No|
Cars24 has also positioned itself as US-based Carvana, an online dealer of pre-owned cars, which has a market cap of $27.7 billion. “This is why foreign investors are more comfortable giving that sort of premium to Cars24,” Khatter added. On the other hand, CarTrade doesn’t have any international presence.
“The original CarTrade was a business-to-business car auction platform, which banks used to liquidate assets. That’s not a real value generator because the margin is very low. They are the market leaders in that, yes, but it's a very limited tank,” he added.
ALSO WATCH: Droom founder Sandeep Aggarwal's interaction with Business Insider, where he talks about the company's surging valuation, upcoming IPO and expansion plans.
#HangoutwithBI: All you need to know about the first Indian startup from the auto space getting ready to hit the capital markets. @iyer_sriram in conversation with @letsdroom's Sandeep Aggarwal (@SandeepAgg). https://t.co/4dN4lzjbiQ— Business Insider India🇮🇳 (@BiIndia) July 30, 2021
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