CarTrade share price jumps 6% as analysts see potential for value creation in Sobek acquisition
CarTrade Tech share price rallied more than 6% on Tuesday, with the stock hitting an intraday high of ₹518.00 apiece on the BSE. The gains in CarTrade Tech shares came after analysts maintained their positive view on the company’s acquisition of Sobek Auto India Private Limited, which includes OLX classifieds platform as well as OLX Autos C2B transactions business.
On July 10, CarTrade Tech had announced that it had entered into a share purchase agreement with Sobek Auto India Private Limited and its holding company OLX India BV for the acquisition of a 100% stake in Sobek from OLX India BV for a cost of ₹537.43. Read here: CarTrade Tech to acquire Sobek from OLX India BV for ₹537.43 crore Experts see potential for value creation over the medium term in this acquisition depending on growth delivery.
At ₹285 crore net revenue, CarTrade paid 1.45x revenue multiple for this acquisition while also becoming a stronger New and Used car classifieds business. Analysts at Citi said post-acquisition, the company's classifieds business will jump 2x to ₹370 crore and transactions business will rise 1.5x At ₹1.77 billion July 2023 annualised revenue, OLX has the largest used classifieds platform in the country.
In comparison to vertical platforms such as CarWale or CarDekho, OLX generates higher margins as there is higher customer lifetime value (CLV) due to the horizontal nature of the platform. Also Read: CarTrade open to more acquisitions in auto, autotech According to analysts, while a typical user would engage in auto sales/purchases once in 4-6 years, the same user can still be selling mobile phone, furniture or electronics, etc.
more frequently, thereby improving CLV/CAC ratio for OLX. Analysts at JM Financial remain
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