CarTrade to acquire OLX India’s auto business for Rs 537 crore, stock soars 15%

Mumbai-based CarTrade Tech, a leading platform for used cars, has made a significant move in the Indian automotive market by acquiring OLX India's auto sales business. The deal, valued at ₹537 crore, involves CarTrade Tech purchasing the entire stake in Sobek Auto India Pvt Ltd, which operates OLX India's automotive business.

CarTrade Tech's acquisition of OLX India's auto sales segment comes at an important time for both companies. The parent company of OLX, Prosus, decided to sell off OLX's automotive business globally due to challenging economic conditions and increasing industry-specific difficulties. Before finalizing the deal with CarTrade Tech, Prosus reportedly held discussions with other players in the used-car segment, including Cars24 and Spinny.

The acquisition aligns perfectly with CarTrade Tech's strategic objectives of making investments that bring added benefits to its existing businesses. By taking over OLX India's auto sales business, CarTrade Tech aims to strengthen its position in the used-car market and improve its overall operations.

The market responded positively to the news, as CarTrade Tech's shares surged nearly 15% in early trade on July 11. This shows that investors have confidence in the company's growth potential following the acquisition. CarTrade Tech had a substantial cash reserve of ₹1,185 crore as of March 31, 2023, which will be impacted by the acquisition. Nevertheless, it highlights the company's commitment to expanding its market presence.

Sobek Auto India, the subsidiary that operates OLX India's auto sales segment, has consistently shown impressive growth in recent years. With a turnover of ₹556.42 crore in FY20, it increased to ₹592.28 crore in FY21. In FY22, the turnover experienced a remarkable year-on-year growth of over 87% reaching ₹1,110.40 crore. This strong growth indicates the segment's potential and attractiveness for CarTrade Tech.

CarTrade Tech enjoys support from notable investors such as Warburg Pincus, Temasek, JPMorgan, and March Capital. As a multi-channel auto platform, the company offers a wide range of services, facilitating the buying and selling of both used and new cars.

Despite witnessing a surge of approximately 41% in the past three months, CarTrade Tech's stock is still trading at a considerable discount of around 65% from its issue price of ₹1,618 during its public offering in 2021. This could present an exciting opportunity for investors who believe in the company's future growth prospects.

The acquisition of OLX India's auto sales business positions CarTrade Tech as a dominant player in the used-car market and opens up new avenues for expansion and innovation. As the company integrates OLX India's automotive business into its operations, industry observers eagerly anticipate the positive effects and advancements that will result from this transformative deal.