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The transformative journey of used car startups in India: Report

EntrackrEntrackr ยท 1y ago
The transformative journey of used car startups in India: Report
Medial

The Indian used car market is witnessing a significant transformation, driven by various factors such as the COVID-19 pandemicโ€™s impact on individual mobility preferences, increased financing options in the used car market, and reduced cash inflow for new car purchases. And perhaps most importantly now, the new and spreading norms on the scrapping of cars. This shift has led to a surge in availability, and demand for used cars, with buyers seeking alternatives to new vehicles. The market is poised for considerable growth, especially with the implementation of new emission standards and focusing on reducing diesel car production. As per a report by Motor Intelligence, the Indian used car market is expected to reach $31.62 billion in 2024 and grow at a CAGR of 15.10% to reach $63.87 billion by 2029. Among the used car companies in India, Cars24 is leading the pack with over Rs 5,500 crore in earnings. Spinny achieved the second position last year with nearly 30X growth in revenue. CarDekho, CarTrade, OLX and Droom are next on the list. The funding and valuation game The used car space has witnessed four unicorns so far including Cars24, Spinny, CarDekho, and Droom. Valuation-wise, Cars24 is on top with $3.3 billion followed by Spinny, CarDekho, and Droom. At the same time, CarTradeโ€™s market capitalization stands at around $370 million. Notably, all of these raised their last funding in 2021. In contrast, OLX has not raised any funding for a long time. Rising scale of leading used car players Cars24โ€™s revenue from operations marginally declined 8.9% to Rs 5,534 crore during the last fiscal year while in grabbing the second spot, Spinnyโ€™s scale jumped nearly 30X to Rs 3,261 crore. CarDekho also managed 46% growth with Rs 2,332 crore in revenue. However, the company is also involved in other operations like insurance, marketing et al. Its revenue from the sale of used cars stood at Rs 952 crore during the period. CarTradeโ€™s sales grew 16.3% to Rs 363.7 crore in FY23 as compared to Rs 312.7 crore in FY22. OLX and Droom recorded Rs 514.92 crore and Rs 253.3 crore in revenue during FY23, respectively. For context, Cars24 makes over 90% of its revenue from the sale of cars while a small part comes from financial services. Similarly, Spinny made 95% of its revenue from the sale of cars while the remaining was from services, including commissions on car sales and financial services. Where are the used car companies spending? Cars24 spent over 80% of its expenses on the procurement of goods while Spinny and CarDekho booked 72% and 33.7%, respectively, under the same. CarDekho spent 21.7% of its cost on employee benefits and 21.1% on advertising and promotional expenses. CarTrade incurred the majority (55.9%) of its expenditure on employee benefits followed by promotional and other expenses. The red and green: Bottomline of the used car players Listed on the stock exchange, CarTrade is the only profitable company among the leading players as of FY23. The company posted Rs 40.4 crore profits in FY23 against Rs 121.3 crore in losses the previous year. On the back of rising expenses, Spinny has the highest losses, but not the worst margins. Its losses crossed the Rs 800 crore benchmark in FY23. CarDekho and Cars24 are next in line with Rs 566 crore and Rs 467.7 crore losses, respectively. Meanwhile, CarDekhoโ€™s auto business reported Rs 360 crore losses during the period. A look at Covid & Pre-Covid performance The COVID-19 pandemic impact on Cars24, CarTrade, and Droom was big enough to lead to a decline in revenue. On the other hand, CarDekho and Spinny managed to achieve positive growth, although below expectations. Consolidations in used car space The pre-owned car space also saw a bunch of consolidation as bigger brands took over smaller ones over the past five-six years. CarDekho topped the list with seven acquisitions including Revv, Carmudi, Carbiqi, Help on Wheels, ZigWheels, BuyingIQ, and Gaadi.com. Listed company CarsTrade took over Olx Auto, SAMIL, Adroit Inspection, and CarWale whereas Spinny acquired three startups โ€“ Scouto, Truebil, and HopCar โ€“ since its inception in 2015. OLX as a group acquired around 12 companies which also included global companies such as Sulit and Tokobagus. Recent Developments Delhi NCR-based Cars24 is reportedly piloting a new service that allows car owners to hire drivers on-demand on an hourly basis. The startup had launched a separate app โ€“ Autopilot Driver โ€“ a few months ago to onboard drivers for the new service. CarDekho shut down its used car retail business amid continuously losing money in the B2C model because of high burn on parking, showrooms, and manpower without any sight of profitability. User behavioural shift in the used cars segment Second-hand cars have been in fashion for eons. However, there has long been a stigma attached to owning a used car. Beyond social status and related concerns, people have had trust issues regarding sellersโ€™ credentials, the history of cars, and so forth. The growing number of startups in this space, however, have democratized the process and have made it more accessible to common users. While increased accessibility and the shedding of stigma are commonly observed, there has been a big change in how people approach used cars. As mentioned above, the pandemic has also had a significant impact, alongside changes in policies and advancements in technology. The trend toward choosing used cars is growing stronger for several practical reasons, a Cars24 spokesperson said. โ€œBuyers are discovering that used cars offer significant value, allowing access to higher-end models and features without the steep price of a new vehicle. The reliability of used cars has greatly improved, thanks to comprehensive inspections and refurbishments, making them a dependable choice. Additionally, the fact that new cars depreciate quickly makes pre-owned vehicles an appealing option for those looking to maximise their investment. This shift in consumer behaviour reflects a smarter, more value-conscious approach to car buying,โ€ the spokesperson explains. The spokesperson further said that car buyers in India are ready to spend 30% (FY22 vs FY23) more on their vehicles, steering towards models with premium features and better overall quality. There is also a surge in demand for SUVs. EVs are too making their way in the used car segment. โ€œIn 2023, there was a phenomenal 5X surge in enquiries for EVs on the platform, reflecting a growing interest in alternative fuel options and a shift towards cost-efficient and eco-conscious driving,โ€ the spokesperson said, adding that Cars24 is currently averaging 200 enquiries daily for EVs. CarDekho is also bullish on the used car segment. โ€œUsed cars will still continue to do fine as the older vehicles will migrate out of metros,โ€ said Amit Jain, co-founder and CEO of CarDekho Group. Jain also highlighted that demand for used cars is mostly from individual users as cab drivers need a yellow plate which is expensive, making the proposition unviable for cab drivers. โ€œCab drivers also need CNG installations as most of the used cars are either petrol or diesel which add extra burden on them,โ€ he added. TheKredibleโ€™s take Even as it is a huge and growing market, it is well known that making money in the market is a different ball game. Buyers have the option of direct deals with owners, free listing sites and of course, a massive unorganised market, before they approach the organised players. With the option of going with the firms floated by automakers such as Maruti Suzuki True Value and First Choice are always there in case of a purchase. Thus, beyond the obvious issue of price for both sellers and buyers, these firms have to invest in differentiators that will be valued. The high losses and lack of loyalty indicate just how little success they have had in this effort. We believe lasting success in the category will continue to demand a long-term, high-investment approach that not all the existing players will survive.

CarDekho Groupโ€™s revenue slips due to closure of used car biz; InsuranceDekho shines

EntrackrEntrackr ยท 7m ago
CarDekho Groupโ€™s revenue slips due to closure of used car biz; InsuranceDekho shines
Medial

CarDekho Group, which operates platforms like CarDekho, InsuranceDekho, BikeDekho, PriceDekho, Rupyy.com, has posted a modest 3.5% drop in its revenue FY24. However, the Jaipur-based firm managed to cut down losses by 40% in the same period. CarDekho revenue from operations fell to Rs 2,250 crore in the fiscal year ending March 2024, from Rs 2,332 crore in FY23, its consolidated financial statements sourced from the Registrar of Companies show. The dip in revenue was due to the closure of the used car business, as explained by founder and CEO Amit Jain in a conversation with Entrackr. Meanwhile, the groupโ€™s insurance segment achieved remarkable growth, surging approximately 8X during the past fiscal year. The transaction business is CarDekho's largest revenue contributor, accounting for 41% of its total operating revenue. This includes performance-based advertisements for automakers, dealer-customer connections, and financial services for buyers. The segment grew by 16.5% in FY24, reaching Rs 930 crore. Income from insurance broking (InsuranceDekho - ID) emerged as the second largest revenue grocer for CarDekho which formed 33% of the groupโ€™s revenue. Income from ID surged 7.8X to Rs 743 crore in FY24. Advertising, digital marketing, the sale of used cars, and other allied services contributed Rs 384 crore, Rs 176 crore, and Rs 17 crore, respectively. The company also added Rs 143 crore of other income (non-operating), making a total revenue of Rs 2,393 crore in FY24. The PeakXV-backed-company allocated 26% of its total expenses to advertising and promotions, which fell 13.6% to Rs 700 crore in FY24. Employee benefits were another significant expense, holding steady at Rs 642 crore, including Rs 74 crore in ESOP costs (non cash in nature). With the hyper-growth in the insurance segment, the related expenditure spiked 37X to Rs 301 crore in FY24. CarDekho spent Rs 547 crore and Rs 177 crore on outsourcing manpower and purchase of old cars in FY24. Its legal, technology, travel, and other overheads took the overall to Rs 2,669 crore in FY24 from Rs 2,921 crore in FY23. Despite closing its used car retail business, the group's other segments performed well and managed to cut losses by 40% to Rs 340 crore in FY24, down from Rs 566 crore in FY23. Its ROCE and EBITDA margins improved to -9.2% and -9.1% respectively. Cardekho expense expense-to-earning ratio stood at Rs 1.19 in the previous fiscal. The IPO bound firm has total current assets of Rs 3,084 crore including the cash and bank balances of Rs 688 crore in FY24.

Auxiloโ€™s profit jumps 2.5X in FY24; revenue grows double

EntrackrEntrackr ยท 11m ago
Auxiloโ€™s profit jumps 2.5X in FY24; revenue grows double
Medial

Overseas education loans have picked up steam in India in the last few years, and the specialized companies in the space have been growing exponentially. Incred, LeapFinance and Leverage Edu reported significant uptick in their financing business focused on education. Earlier last year, HDFC had sold off its education loan business, HDFC Credila to a clutch of PEs at a hefty premium too, indicating the bullishness around the sector. The focus of the story today is education-focused non banking financial company Auxilo which posted a two-fold growth in its revenue to Rs 356.68 crore in FY24 from Rs 178 crore in FY23, its annual financial statements with the Registrar of Companies (RoC) shows. Auxilo has churned the majority of its collection through processing fees and interest received on the loan disbursements. This income accounted for 94.8% of the revenue which surged 94.5% to Rs 338.2 crore in the fiscal year ending March 2024 from Rs 173.81 crore in FY23. The company also made Rs 10.64 crore from non-operating sources which pushed its total income to Rs 367.32 crore in FY24. On the expense side, interest on borrowing formed 61.35% of the total expense. This expense mounted by 144.58% to Rs 168.49 crore in FY24 from Rs 68.89 crore in FY23. Meanwhile, its employee benefit cost grew 28.45% to Rs 41.76 crore in FY24 from Rs 32.51 crore in FY23. Other expenses including legal-professional, business sourcing, advertising increased by 17.91% to Rs 54.6 crore in FY24. Auxilo Finserveโ€™s overall cost grew 2X to Rs 274.63 crore in FY24 from Rs 156 crore in FY23. Significantly, its profit also increased 2.5X to Rs 69.21 crore in FY24 from Rs 26 crore in FY23. Its ROEC and EBITDA stood at 8.57% and 79.91%, respectively. On a unit level, the company spent Re 0.77 to make a rupee of operating revenue in FY24. FY23-FY24 FY23 FY24 EBITDA Margin 70.48% 79.91% Expense/โ‚น of Op Revenue โ‚น0.88 โ‚น0.77 ROCE 6.68% 8.57% Considering that most education loans are not collateral backed, or unsecured, one has to wonder if the industry is not overheating. High growth rates for education loans, when seen in context of the headlines around the tightness in the jobs market, makes you wonder. Of course, lenders are betting on a cyclical turnaround by the time these loans fall due in a couple of years or earlier, besides the surging demand for overseas study in India. But froth is surely building up. Even loans given for study overseas, which form a significant chunk of these, are not the sure thing they used to be as immigration rules and conditions for work go through a churn in many of the destinations due to tight job markets. It does seem to be a classic case of venture and PE funding driving founders to stay the course, even when they would ordinarily have paused for considering a course correction. We will be watching out for the signs that speed breakers do exist on this seemingly smooth growth highway [overseas education loans].

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