CARTRADENSEQ4FY22May 09, 2022

Cartrade Tech Limited

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Management on call

Vinay Vinod Sanghi

CHAIRMAN, MANAGING DIRECTOR & CEO, CARTRADE TECH LIMITED

Aneesha Menon

CFO & DIRECTOR, CARTRADE TECH LIMITED

Vikram Alva

CSO, CARTRADE TECH LIMITED

Key numbers — 40 extracted

3 million

the passenger vehicle sales right from 2016-17 to 2021-22 as you can see it has almost been flat, 3 million cars were sold in 2016-17 and 3 million cars have been sold in 2021-22, inside there is small ups

rs,

ast 5 to 6 years. If you look at the two wheeler industry, it is actually over the last 5 to 6 years, it has degrown, I mean we had seen almost 10 to 15% degrowth from 16-17 because 17 million to 13.5

15%

ustry, it is actually over the last 5 to 6 years, it has degrown, I mean we had seen almost 10 to 15% degrowth from 16-17 because 17 million to 13.5 million in 21-22, so it has been a challenging tim

17 million

ast 5 to 6 years, it has degrown, I mean we had seen almost 10 to 15% degrowth from 16-17 because 17 million to 13.5 million in 21-22, so it has been a challenging time in the last few years with the auto i

13.5 million

rs, it has degrown, I mean we had seen almost 10 to 15% degrowth from 16-17 because 17 million to 13.5 million in 21-22, so it has been a challenging time in the last few years with the auto industry, there a

28%

n the industry with supply constraints, with semiconductor issues, etc., the Company has grown by 28% and the Adjusted EBITDA has grown by about 25% as well. We are the number one two-wheeler and c

25%

miconductor issues, etc., the Company has grown by 28% and the Adjusted EBITDA has grown by about 25% as well. We are the number one two-wheeler and car portal in the country. We have crossed now 160

1.2 million

will talk about abSure a little later as well. We had listed for auction, the highest numbers are 1.2 million vehicles in FY22, 30 million customers visit our consumer platforms. What is more remarkable in 3

30 million

e later as well. We had listed for auction, the highest numbers are 1.2 million vehicles in FY22, 30 million customers visit our consumer platforms. What is more remarkable in 30 million, unique visitors vi

84%

re remarkable in 30 million, unique visitors visit our platform every month is also the fact that 84% of them organically and that shows the brand affinity and strength in the brand and the leadershi

Rs. 106 crore

ever we have achieved in the last year and in the last quarter, our last quarter revenues hit at Rs. 106 crores, it has given an annualized rate of Rs. 423 crores. Our Adjusted EBITDA last quarter was Rs. 32

Rs. 423 crore

last quarter, our last quarter revenues hit at Rs. 106 crores, it has given an annualized rate of Rs. 423 crores. Our Adjusted EBITDA last quarter was Rs. 32 crores which is adjusting with our run rate of Rs.

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Guidance — 20 items

Vinay Vinod Sanghi

opening

“We do not expect this to be in FY23, so I think that itself will tell you about the Company’s performance going forward.”

Vinay Vinod Sanghi

opening

“We are likely to go to 120 outlets by the end of next year and therefore become a sizable part of our revenues in our business as we go on.”

Vinay Vinod Sanghi

“So, the project we are running within which is really going to benefit for us and where do you think we can dominate the entire used vehicle industry is that we keep India as one market and auction is 1.2 million vehicles every year which we do and we allow every bidder in India to have access to all our inventory which we do through online system, it gives us a very big, differentiated advantage, as you say India’s one market and one click purchase.”

Vijit Jain

“My question on the consumer business, Vinay is the traffic, how should one think about it going forward because Y-o-Y the traffic number seems to have come off a little bit and second, so in that context, how are you thinking about the marketing spends here going forward, I know FY21, you were kicking it back to normal levels, so first that and second on abSure, do you have at this point any guidance on what kind of volumes you think you will hit once you hit that 120 store count by end of FY23?”

Vinay Vinod Sanghi

“At this point, I am not able to give an average volume per store guidance, but we have focused heavily on making sure these outlets keep growing and stay healthy and profitable and let us say these are franchise owned outlets, they are run and owned by dealers.”

Vimal Gohil

“That is my first question and the second question is on abSure again, so basically what kind of take rates are we looking at, generally for the used car industry the take rates will hover around 7 to 8%, since we are in the franchisee model what are the take rates that we are looking at this point in time and should we assume similar take rates going forward as well?”

Aneesha Menon

“5 crores, the average between the two is more realistic going forward, Vimal, so the Rs.”

Vimal Gohil

“So, should we then assume this as the normalized rate going forward?”

Vimal Gohil

“And your outlook on margins for the standalone starts, what is the aspiration, guidance, whatever, you may probably call it, what is it like, should we still understand this visits to be a very nonlinear kind of a business where there is a very huge upgrade to margin?”

Vinay Vinod Sanghi

“It is more of pilot, I don’t think we are doing it going forward, this is just piloting a model, it is very small amount, so we are just piloting the model.”

Risks & concerns — 5 flagged

The one concern I would like to point on the consolidated financial results has been some escalation in manpower cost and marketing cost last year in terms of the previous year, but I want to stress here that the manpower cost up by 25% is primarily 1 because the year prior to COVID increments are very low on existence and therefore increments have been much higher in the last year.

— Vinay Vinod Sanghi

Sure Ankit, what I want to stress on yes, we are sitting with almost Rs.

— Vinay Vinod Sanghi

So, when we start comparing year 21 and 22, it looks like this and the fact is also you are absolutely correct, some of the costs in 22 have gone up and I think the primary reason for that is product tech talent in the consumer business has been just with amount of money or start-ups getting funded, challenge has been product tech, talent and cost related to that.

— Vinay Vinod Sanghi

I completely agree with you and in fact this has been a tough year for us to be honest because the base of the previous year has been the challenge to be honest.

— Vinay Vinod Sanghi

The industry has gone through a very specific challenge of supply constraints through semiconductors and other supply chain issues, but the whole industry is getting back to normal and we are really happy that we have had year with the foundation got stronger.

— Vinay Vinod Sanghi

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Q&A — 10 exchanges

My first question is related to the cash which we have on our balance sheet, so we have been maintaining that in our previous con-calls as well wherein we will use it for inorganic growth or acquisition, can you throw some more color on that as in what kind of Company we would be looking at to acquire right now, just for example, I have been looking at something like Car Mechanics which is growing very fast in the car mechanic space, so would you be interested in something like that or there are other plans or other companies also in the other domains which you are looking at if you can help m

Vinay Vinod Sanghi

Sure Ankit, what I want to stress on yes, we are sitting with almost Rs. 1000 crores of liquid assets and liquid funds on our balance sheet. I think the intent here is that we have these 30 million customers. Most people come to our platform to buy a car or sell a car or a two wheeler. Our intent is, can we provide an additional product or service to these 30 million customers which come every month. Now, like you said car servicing is an opportunity for us, we would obviously look at companies in this space, digital or real-world companies and see whether our customers would want to avail of

I have couple of questions on the remarketing business, so 4Q is generally seasonally strong for you in the remarketing business, right and in that context two things look like in the numbers and I see them versus 3Q there is not very big growth there and second also when I look at Y-o- Y the marketing businesses looks like commission per vehicle has declined a bit because the auction volumes are still up 20% odd, but the revenues are down slightly versus that, so that is my first question on the remarketing business and then I will just ask my question on the consumer business?

Vinay Vinod Sanghi

So, Q-o-Q revenue from Q3 to Q4 is your question really, Q3-Q4 has been more or less similar. I think the difference we had in Q1, Q2 and Q3 really on one side and Q3, Q4 on the other side, seasonality is not high, but you want to remember just now across the businesses, it has been very hard to compare Q-o-Q because of the COVID impact at various stages, I think Omicron January, February, the previous year you had, we had April and July really in this current year itself COVID and the previous year April to June again, so it has just been hard to really look at any quarter-on-quarter, but the

Sir, my first question is on your standalone margins, basically just wanted the clarification on while you have clarified on the marketing spends, just wanted to know what is causing the other expenses which is about Rs. 8.5 crores, you are running in that run rate per quarter, we were at about Rs. 5 crores quarter run rate last year, so what is leading that? That is my first question and the second question is on abSure again, so basically what kind of take rates are we looking at, generally for the used car industry the take rates will hover around 7 to 8%, since we are in the franchisee mod

Vinay Vinod Sanghi

Aneesha, you wanted to take the other cost issue first, then can talk about abSure. Sure, Vinay. On the other expenses for the standalone entity as we pointed out the quarterly cost is about Rs. 8 crores as against Rs. 5 crores, the average between the two is more realistic going forward, Vimal, so the Rs. 8 crores does have some amount of annual entries that we do pass. Also there were some amount of listing related or expenses that we did in the post listing which is appearing in the other expenses. Travel and some of the other expenses have gone up, recently where we have picked up has gone

Quickly on a couple of things, basically my first question is with regards to appearance of COG for inventory in your financial, so what does this refer to can you elaborate on that please?

Vinay Vinod Sanghi

Aneesha, you want to clarify? Sachin, this is in relation to the buy and sell which is hosted under the auction umbrella. There were some portion of our auction revenues where we did buy inventory and sell inventory which is what is appearing in the purchase stock. It is more of pilot, I don’t think we are doing it going forward, this is just piloting a model, it is very small amount, so we are just piloting the model. Another question is with regards to the same thing that Vimal was asking about, so on the standalone piece, I remember during the last earnings call you were certain that there

Sir, my first question is on the standalone business again, if I look at the growth trajectory, on a quarter-on-quarter basis, the industry volumes have definitely improved, but in terms of our revenues, the improvement has been more gradual, so is it that the industry recovery on the advertisement side is taking longer or is there any market share changes which are happening and what is the outlook from here, how much growth do you see can come through for the industry as such in the next year?

Vinay Vinod Sanghi

Sorry, was your question at the revenues have grown at 35% and the standalone that is clear in the consumer business, what was the question, was it that the industry is doing? I was more actually looking the growth may be on quarter-on-quarter basis because the COVID impact is not there and the industry’s volume size is sort of going up, so from that perspective actually a 6% growth…? Actually, the industry last quarter is degrown by 1%, so I don’t know if the industry has grown last quarter. So, the car industry has actually degrown by 1% last quarter, but what I was right to explain, just ex

I have couple of questions, first is that if it would be possible going forward or rather can you give us some understanding of the standalone business in the sense that how much cost is related to directly to the advertising piece or rather the business and how much to the new project that we have which is the financing in abSure, so that we can actually better understand the margins that are coming from that, the reason I ask is globally such platforms deliver 30%-40% EBITDA margin? That is one, second, I wanted to understand if I look at Google trend data, the views or visits show a lot hig

Vinay Vinod Sanghi

I think the first question is where we are making investments, we are making two significant investments which are factored in our standalone accounts, one is on digitization where we have whole product teams working on giving a different customer experience for the future. That is an investment which is to me an operating expense because it is investing in our current business which is really about making sure when people like you and me come on a platform, today there are certain things, find the car, select the car, choose the car, understand which car to buy, the whole bunch of work. Tomor

Ravi· Bay Capital

Vinay, Aneesha, this is Ravi from Bay Capital. Just one question from my side, the topline growth is at 35% growth in the standalone numbers, if you can just talk a bit about what is driving that growth, so is it driven more by OEMs disproportionately swimming on digital or is it because dealers are sending for more business on digital push towards you, if you can just talk a bit more about that it will be very useful for us? Second question I just wanted to ask is, the trends that you are showing which is CarWale and how dominant it is versus others, is that also getting reflected in the busi

Vinay Vinod Sanghi

The growth is coming from actually both sectors, I think the two things which are happening, one is that of course there is a little bit more of digital belief among manufacturers and dealers in India. The trade itself is changing, behavior itself is changing because of the COVID impact, so even though the industry as a whole not grown, the digital is growing for them and I think we are just seeing the first signs of it. This is in no means where it will be. I think it will grow at a fast rate or manufacturers and dealers in this form are digitalized to go on as the time goes on. So, it is com

Yes, it is a good question Surya and actually in our business, we do not monetize all these users. It is something on a fill rate which means a percentage of this 30 million we are able to monetize from car manufacturers and car dealers. The limitation for us is not the number of customers, the limitation for us is the amount of money, manufacturers, dealers spend on digital. That is the limitation, so without increasing traffic we could rapidly grow our revenues, it is the simple answer, as manufacturers gives us budgets go up on digital advertising, I think that is the point. Suryanarayanan

Vinay Vinod Sanghi

And it is other way to monetize the customers better by alternate methods of transaction financing insurance loans because the customers do in both ways, one is monetizing them just as car manufacturer and dealers there because we don’t monetize all of them and second is of course adding other source of revenue from the same customer, both actually are right. Suryanarayanan Manian: And this may not be such a big trend, but just that in terms of the percentage organic traffic that you are getting it seems to be just sequentially coming down a bit over the last 2-3 quarters, so is that something

So, as you have mentioned that your 14% of the OEM spends are digital, I just want to know how much of this revenue comes to be auto portals and may be what is the market share of CarWale of that spend of those auto portals?

Vinay Vinod Sanghi

The total amount spend is about I think about Rs. 6,500 to Rs. 7000 crores, 14% of that would be about Rs. 850 crores a year. Our standalone accounts show Rs. 123 crores, so that is the simple as our CarWale is already at Rs. 850 crores and Rs. 123. That is one part. Where is the balance 700 going is mostly to be honest, mostly going to horizontals, it is all digital spends, it all going to like Google, Facebook or it will go to Youtube or it will go to Times of India.com or any kind of digital asset horizontal in the country, but CarWale is 120 out of 840 and 850. Aneesha, was that the correc

I just want thank everybody for joining the call and it has been everybody in India has been, it is quite a challenging year with 2 years of COVID. The industry has gone through a very specific challenge of supply constraints through semiconductors and other supply chain issues, but the whole industry is getting back to normal and we are really happy that we have had year with the foundation got stronger. We had a reasonably robust 28% growth rate in spite of all the market situations. We are feeling pretty confident of the future and we are very excited that in the next year, we should do a l

Management

Speaking time

Vinay Vinod Sanghi

Moderator

Aneesha Menon

Ravi

Ankit Kanodia

Vimal Gohil

Vijit Jain

Sachin Dixit

Siddhartha Bera

Akshay Jagani

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Opening remarks

Vinay Vinod Sanghi

Thank you Margreth and I would like to welcome all of you to the CarTrade Tech quarterly investor presentation. Thank you for taking the time out and spending time with us to understand the progress and the plans of the Company. We have uploaded our presentation and also I am going to refer to it and also speak out some of the numbers for people who may not have seen it or may not download it or have it with them at this point of time. Really on Slide #2 or page 2, what we are covering is the industry overview: What I want to talk about is the industry over the last few years first, if you look at the left and then to the passenger vehicle sales right from 2016-17 to 2021-22 as you can see it has almost been flat, 3 million cars were sold in 2016-17 and 3 million cars have been sold in 2021-22, inside there is small ups and downs during this period, but the industry mostly been flat over the last 5 to 6 years. If you look at the two wheeler industry, it is actually over the last 5 to 6

Aneesha Menon

Sure Vinay, thank you so much. To add to what Vinay said and clarify since there has been questions around the ESOP, the approximate cost for FY23 on an annual basis will probably be around Rs. 25 to Rs. 30 crores as against the Rs. 185 crores that we see in FY22. So, this is reiterating that this 185 is the onetime cost and probably in FY23, the approximate charge that we are likely to see is about Rs. 25 to Rs. 30 crores. This is on an annual basis. If you move on to the next slide, the Slide #6 of the presentation, we have shared the standalone results of CarTrade Tech which predominantly hosts the consumer group business, these are revenues from other sides like CarWale, CarTrade, and BikeWale which are media and lead driven kind of businesses and also includes CarWale abSure. We have achieved our ever highest quarterly revenues in the consumer group business which is about Rs. 36 crores in the quarter ended March 2022 and also we have reported a 35% growth year-on-year on the cons

Vinay Vinod Sanghi

Sure, thank you Aneesha. This, I want to spend a couple of minutes just on the platform and what we are looking to do and what we have done in terms of our key initiatives. Really, this is a platform we thought of build as I have said so in the earlier calls and earlier meetings, look at CarTrade Tech as a platform where on the leftmost side for the consumer side which houses all our consumer brands, CarWale, BikeWale and as we talked about earlier on this platform we get 30 million unique customers every month, so one of the strengths of the consumer brands where people come and buy new cars, used cars, two wheelers or sell their cars because 30 million customers and 84% then come organic. So, as I said, key initiatives always will keep growing that business, we monetize leads and advertizing business for manufacturers and car dealers out there and we have talked through the standalone financial for that. Then, you got the second block which is our remarketing business where you got o

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