Loss-making Cars24 is worth more than a profitable CarTrade ?— here’s why

• Cars24 has raised a funding of $450 million from 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.

Gurugram-based used cars marketplace Cars24 became a unicorn last year and raised some more money now despite piling up losses. Meanwhile, its competitor CarTrade Technologies, which is profitable and listed on the stock exchanges since August, continues to be valued at less than half the estimated valuation of Cars24.


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.

Later it was reported that the round aggregated up to $450 million, of which $340 milion was equity investment while $110 million was raised in debt. The company was valued at 1.84 billion post this round.

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.

Kunal Khatter, managing partner at mobility-focused investment firm AdvantEdge, told Business Insider that private investors and retail investors value companies with different yardsticks.

“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.

Point of difference between CarTrade and Cars24 (Cars24 Services Private Limited).

Metrics	CarTrade	Cars24
Revenue (in FY20)	?318.4 crore	?3,059 crore
Profit after tax/(Loss) (FY20)	?31.2 crore	(?277.18 crore)
Cities	300	150
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.

CarTrade also owns other platforms like CarTrade, Carwale, CarTradeExchange, Shriram Automall, Adroit Auto, Auto Biz, and BikeWale. Majority of CarTrade’s valuation comes from its three assets: Carwale, commercial trucks platform Shriram Automall and inspection business Adroit Auto, Khatter added.

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.

Segment	CarTrade	Cars24
New automobile sales	Yes	No
Used car sales	Yes	Yes
Commercial vehicles, farm and construction equipment	Yes	No
Online auction platform	Yes	No
Vehicles financing	Yes	Yes
Car inspection	Yes	Yes

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.


Update: Cars24 on September 20 announced that it raised $450 million, at a valuation of $1.85 billion.

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