Daily BriefsIPOs and Placements

Equity Capital Markets: Cartrade, Cloud Village and more

In today’s briefing:

  • CarTrade Tech IPO- A Patchy Drive
  • Cloud Village (NetEase Music) Pre-IPO – Initial Thoughts on Valuation

CarTrade Tech IPO- A Patchy Drive

By Nitin Mangal

Internet IPOs are turning out to be the theme of the year in India so far. In yet another instance, Cartrade (0056989Z IN), operator of Carwale, and Bikewale lately received SEBI’s nod of floating the public issue.

Cartrade, along with its subsidiaries, operates an automotive digital ecosystem which connects automobile customers, OEMs, dealers, banks, insurance companies and other stakeholders. The Group owns and operates under several brands: CarTrade, CarWale, Shriram Automall, BikeWale, etc. Through these platforms, the group enables new and used automobile customers, vehicle dealerships, automotive manufacturers and other businesses to buy and sell their vehicles.

While the auto tech platforms have several players in the Industry, CarTrade is the first one in the line to get listed. The company also reported in the DRHP that it is the only competitor to boast a positive net income, while also ranking number one on relative online search popularity when compared to their key competitors over the period from April 2020 to March 2021. 

However, on the flip side CarTrade also undergoes several shortfalls on the balance sheet end. A simple forensic check of DRHP reveal issues like aggressive revenue recognition, worrying cash yield, fragile earnings, etc.

Cloud Village (NetEase Music) Pre-IPO – Initial Thoughts on Valuation

By Sumeet Singh

Cloud Village Inc. (CVI), also known as NetEase Music, plans to raise around US$1bn in its Hong Kong IPO. The company has also obtained investments from Baidu and Alibaba, along with other investors.

As of Dec 20, it had 181m online music MAUs, 16m online music services monthly paying users, 327,000 social entertainment services monthly paying users. It had over 60m music tracks, of which more than 1m were created by registered independent artists. Its daily active users on average spent 76mins daily listening to music. 

CVI’s revenue has grown 4.3x over FY18-20, to RMB4.9bn. There have been no signs of slowdown as its revenue increased by 102% in FY19 and was up another 111% in FY20. Both online music services and social entertainment services revenue have shown strong growth. Online music services revenue grew by 73% in 2019 and another 47.6% in 2020. Social entertainment services revenue was the largest driver of growth, as it grew by 344% in 2019 and was up another 320% in 2020. However, it remains a distant second player in the market and has yet to make a profit.

In this note, we will comment on valuations.

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