CarTrade Tech Limited (CARTRADE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of CarTrade Tech Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vinay Vinod Sanghi, Chairman, Managing Director and CEO, CarTrade Tech Limited. Thank you, and over to you, sir.

Thank you, Margaret, and I'd like to welcome all of you to the CarTrade Tech quarterly investor presentation. Thank you for taking the time out and spending time with us to understand the progress and the plans of the company. We have uploaded a presentation. And although I'm going to refer to it, I'll also speak out some of the numbers for people who may not have seen it or may not have downloaded it or have it with them at this point of time. Really on Slide 2, what -- or Page 2, what we are covering is the industry overview, what I want to talk about is the industry over the last few years first. If you look at the left and then to the passenger vehicle sales right from 2016, '17 to 2021, '22, as you can see, it's almost been flat. 3 million cars were sold in 2016, '17 and 3 million cars have been sold in 2021, '22. It had a small ups and downs during this period, but the industry has mostly been flat over the last 5 to 6 years. If you look at the 2-wheeler industry, it's actually over the last 5 to 6 years, it has degrown. I mean we've seen almost a 10% to 15% degrowth from '16, '17, which was 17 million to 13.5 million in '21, '22. So it's been a challenging time in the last few years with the auto industry. There are many reasons why that might have happened, there has been COVID in between, the BS-6 norms got implemented, demonetization, multiple, multiple factors, but the reality is you've seen the industry over the last 5 years has mostly been flat to down. If you look at Slide 3 and you look at the company performances in the last year, it gives me great pleasure to tell you that we've grown in spite of the tailwinds in the industry with supply constraints, with the semiconductor issues, et cetera, et cetera. The company has grown by 28%, and the EBITDA has grown by over about 25% as well. We are the #1 2-wheeler and car portal in the country. We have crossed now 160 locations that includes our auto malls in 113 locations and 47 abSure outlets now. I will talk about abSure a little later as well. We have listed for auction, our highest ever numbers of 1.2 million vehicles last year. 30 million customers visit our consumer platforms. What's more remarkable than 30 million unique visitors visit our platforms every month is also the fact that 84% of them come organically. And that shows the brand affinity and the strength in the brand and the leadership in the brand, which our platform, the consumer platforms, CarWale, CarTrade and BikeWale have. Our revenue is the highest ever we've achieved in the last year and in the last quarter. Our last quarter revenues hit at INR 106 crores or INR [indiscernible] billion, but INR 106 crores is the way to look at it, which has given an annualized rate of INR 423 crores. Our EBITDA last quarter was INR 32 crores, which has given us an adjusted EBITDA run rate of INR 127 crores. Our EBITDA margin has come to 21% in Q4 and 21% is after excluding our other income. If we add our other income, it goes to 31%. So we've given you both the numbers, EBITDA margin without other income, which is 21%. And if you include other income, which is noninterest income or treasury earnings, it goes to 31%. Our adjusted PAT or profit after tax, adjusted profit after tax, and this is adjusted only for our onetime for us, our ESOP costs, which are noncash costs. So our adjusted PAT is at INR 64 crores last year. As you know, the company is completely debt-free. Cash balances have gone to over INR 1,000 crores, which are invested and can be used for the company's growth in the future. So INR 64 crores is the adjusted PAT. As you know, the company is cash profitable and generating cash in the last year. If we go to Slide 4 or Slide -- Page 5, I want to first cover the consolidated financial results for the company, which is both for the quarter and for the year. And Slide 5 will show you that we have achieved, first, our highest ever revenues in the last quarter at INR 106 crores. We've also achieved our highest ever revenues in a year at INR 358 crores. The INR 358 crores in revenues had given us -- in the year '22 has given us a 28% growth in revenues during the year. Our EBITDA, our adjusted EBITDA, which is adjusted for our ESOP costs or our noncash ESOP cost is come at INR 97 crores, which is a 25% increase over the previous year and also our highest ever EBITDA. It's been a challenging year, as I said, for the industry with COVID, semiconductors, et cetera, but we've been able to achieve the highest ever revenues at INR 358 crores and adjusted EBITDA at INR 98 crores. As I once again highlighted in the previous page, our adjusted PAT is INR 64 crores. And if you look at an adjusted EBITDA margin, which is in absence of -- or removing the other income, it comes to 21% for the quarter and 16% for the year. So these are the rough financial highlights for the quarter and for the year. The one concern I'd like to point out in the consolidated financial results has been some escalation in manpower costs and marketing costs last year in terms of the previous year. But I want to stress here that the manpower cost up by 25% is primarily one, because the year prior to COVID, increments were very low on nonexistent, and therefore, the increments have been much higher in the last year. So it is almost like a correction in salaries. Marketing costs have very, very low during the COVID period and therefore, have come back to more normal costs and therefore, we're seeing a huge escalation when compared to the previous year. But on the whole, I would say the company's foundation has just got stronger. We've made a lot of progress by growing at 28% and profits have grown as well. One of the few Internet companies in India, which are cash profitable and growing in revenues, and that's probably the highlight. At the bottom, there's a footnote about the ESOPs of the company, which talk about a onetime charge, which was there in the last year of INR 145 crores and the total ESOP cost of INR 185 crores. As I said, this INR 145 crores was a onetime charge for FY '22. We do not expect this to be in FY '23. So I think that itself should tell you about the company performance going forward. Aneesha, do you want to add anything to this and then take on the stand-alone and the other financial results?

Sure, Vinay. Thank you so much. To add to what Vinay said and to clarify since there has been questions around the ESOP, the approximate cost for FY '23 on an annual basis would probably be around INR 25 crores to INR 30 crores as against the INR 185 crores that we see in FY '22. So this is reiterating that this INR 185 crores is a onetime cost and probably in FY '23, the approximate charge that we are likely to see is about INR 25 crores to INR 30 crores. This is on an annual basis. If you move on to the next slide, the Slide 6 of the presentation, we have shared the stand-alone results of CarTrade Tech, which predominantly hosts the consumer group business. These are revenues from our websites like CarWale, CarTrade and BikeWale, which are media lead-driven kind of businesses and also includes CarWale abSure. We have achieved our ever highest quarterly revenues in the consumer group business, which is about INR 36 crores in the quarter ended March 2022. And also, we have reported a 35% growth year-on-year on the consumer group business for revenues from operations. The consumer group business continues to report profits if we exclude the ESOP adjustment for the quarter and for the year. The increase in the cost that Vinay has covered in the consolidated set of accounts is also or rather holds good even for the consumer group business. So we move on to the next slide, which covers the remarketing business, which is represented by the consolidated SAMIL accounts on Slide 7. This business includes our commission, our transaction revenues, which is predominantly our auction and other related businesses hosted under the brand Shriram Automall, which is SAMIL, CarTrade Exchange and Adroit. The revenues for the year was about INR 205 crores, and the adjusted EBITDA for the year was about INR 60 crores. This has resulted in an EBITDA margin of 29% with other income and about 24% without other income. For quarter ended March 2022, we reported revenues of INR 60 crores with close to INR 20 crores of adjusted EBITDA, which has resulted in a 30% adjusted EBITDA margin, excluding the other income. The Slide 8 shows the revenue growth of 28% on a year-on-year basis and 15% in Q4 FY '22 as against Q4 of previous year. The adjusted EBITDA has grown 25% on a year-on-year basis as against 16% in Q4 of this year vis-a-vis last year. The next slide over here displays our nonfinancial metrics that we have been consistently disclosing. This is our average monthly unique visitors across all our platforms. We continue to attract close to 30 million unique visitors every month, of which more than 84% are organic, which is to reiterate that we pay only for a small portion of our traffic, which is close to 16%. We continue to make investments in customer experience and the product, which enables us to sustain such traffic and enjoy a large organic base. Slide 10 reiterates our dominance as a brand over a long period of time. We continue to stay strong at the #1 position in both cars and bikes. This is the Google Trends report, which reiterates our high brand recall value. which is because we are, as a brand, synonymous to trust, quality and reliability. And we continue to make consistent efforts to improve the customer experience as a platform. On the auction side, if you refer to Slide 11, which has been part of the presentation, the listings on a year-on-year basis grew by 43% and by 25% in Q4 of this year as against the previous year. We reached a 1.2 million mark on the number of auctions listed for the year. The volume for the corresponding period have also grown by 54% annually and about 18% quarterly. Vinay, if you could please take up the next slide for us.

Sure. Thank you, Aneesha. I want to spend a couple of minutes just on the platform and what we're looking to do and what we've done in terms of our key initiatives. Really, this is the platform we're trying to build, as I've said so in earlier calls and earlier meetings. Look at CarTrade Tech as a platform, where on the left most side, you've got the consumer group, which houses all our consumer brands, CarWale, BikeWale. And as we talked about earlier, on these platforms, we get 30 million unique customers every month. So one of the strengths of the consumer brand where people come and buy new cars, used cars, 2-wheelers or sell their car. We have 30 million customers and 84% of them come organic. So as I said, the key initiative was to keep growing that business. We monetize leads and advertising business for manufacturers and car dealers out there. And we've talked to the stand-alone financials for that. And then you've got the second block, which is our remarketing business, where you've got our auction businesses, auctions come from the various brands of Shriram Automall, CarTrade Exchange, et cetera, et cetera. And their supply comes from consumers like you and me who want to sell their vehicle or come from big business sell the vehicles to businesses. So it's like a C2B, B2B online, offline platform. And that makes up our Shriram Automall business, which is our remarketing business. So these are the 2 businesses and the 2 platforms which we run. This is divided into our consolidated accounts, our stand-alone accounts and then the remarketing accounts, which we've already talked about in the last 10 to 15 minutes. Each of these businesses has key initiatives. The consumer group first. On our media business, we've got some key initiatives around our CarWale abSure business, which we'll talk through a little later. And a whole digitization of the automobile purchase cycle, which also I'll talk through a little bit a bit later. On the remarketing side, we have 2, 3 very key initiatives. One is to bring more supply to the platform. And then that big initiative of bringing suppliers who bring in more and more consumers to come and sell the vehicles to auction out and add to this 1.2 million vehicles we already auction out. Obviously, it also is to bring more buyers on the other side, bringing more and more businesses, dealers, fleet owners are expected to buy vehicles is another part of the initiative. And then the third block of ours, which is really how we can make strategic acquisition investments in our ecosystem, which is really about making investments or acquisitions in our existing businesses or really in other areas of synergies where our customers can get some value. So it's about value-added services like auto finance, auto insurance, warranties, subscription financing, warranties, et cetera, et cetera. But yes, the third division is something which is on acquisition investments where we can make or use the cash we have to really acquire products or services so that our 30 million customers can get access to other products and services. And that's the intent out here. Aneesha, I can go to the next slide. Sorry, if you can go to Page 13 on the deck for all of you. And really, one of our biggest initiative on the consumer group is really how do we make sure you -- a consumer like you or me can buy a good quality used car, a good quality used car online. And what CarWale abSure provide this to all our consumers. So you can go online today to carwale.com, look for an abSure car. We now are across 47 outlets for all these cars. So you can book it online, get a car delivered and all these cars come with what we call the 4S promise, which is really around a warranty, getting -- having a money back guarantee of the car. So it's really a solve to making sure of delivering an experience to a consumer, which enables them to book a car online and then have it delivered to him or her. And then it comes with this whole 4S promise of quality assurance, right? So that's what CarWale abSure does. We have 47 outlets today. We are likely to go to 120 outlets by the end of next year, and therefore, it will become a sizable part of our revenues in our business as we go on. If you go to Slide 14, which is really part of our big digital initiative for us, one of the things -- the biggest focus or the biggest product focus for the company today is really enabling the journey of buying a vehicle or selling a vehicle in a complete seamless digital manner, what we call in the company a one-click purchase, right, which enables you to come to our platform to select a vehicle, choose a vehicle. What we really want to enable now and what we're enabling and moving towards is being able to select the vehicle, book it online, get a loan instantly delivered online to you so that you can get the vehicle delivered to you. So giving you a complete online experience on a one-click approach to buying a vehicle, we've actually launched this finance marketplace sometime back where we've got multiple, multiple banks giving loans for new cars, used cars or 2-wheelers. And I think as we go on, this will become a very significant part of our digitization efforts to make sure when you buy a vehicle, you get the loan of your choice in a seamless, simple, easy manner. We wanted to cover this with our financials and our key initiatives. We are happy to go into a detailed question-and-answer session so that we're able to answer all your questions and doubts. I again want to highlight saying that, listen, in a very, very tough environment of COVID, semiconductor supply issues, et cetera, et cetera, we've come out with these growth numbers and profit growth as well as revenue growth. There are very few companies in India which grow revenues and profits and grow them simultaneously. I think we've been able to consistently do that. The company has actually made tremendous progress on the brand itself, brand or revenues or other metrics over the last year and we'll be happy to present these accounts to you. As I said, now we're happy to go into question and answers and clear all your doubts and suggestions.

[Operator Instructions] The first question is from the line of Ankit Kanodia from Smart Sync Services.

Congratulations on good set of numbers. My first question is related to the cash which we have on our balance sheet. So we have been maintaining that in our previous con calls as well, wherein we'll go for -- probably use it for inorganic growth or acquisition. Can you throw some more color on that as in what kind of companies you would be looking at to acquire right now? But just for example, I've been looking at something like Car Mechanics, which is growing really fast in the car mechanic space. So would you be interested in something like that? Or there are other plans or other companies also in the other domains which you are looking at, if you can help me?

Sure, Ankit. Thank you for the question. And what I want to stress on, yes, we are sitting with almost INR 1,000 crores of liquid assets and liquid funds on our balance sheet. I think the intent here is that we have the 30 million customers. Most people come to our platform today to buy a car or sell a car or a 2-wheeler. Our intent is, can we provide an additional product or service to these 30 million customers which come every month. Now like you said, car servicing is an opportunity for us. We would obviously look at companies in this space, digital or real-world companies and see whether our customers would want to avail of a service or a repair or an accessory or a spare part or insurance or product or a financing product in the future. And yes, that would be the intent, that can we align a product or service to these 30 million customers and then look at making investments or acquisitions this company so that the customer benefits and our experience gets better for that user which is coming on to our platform. And if we can do that and if we can make or give the customer one more service or one value-added service or product, of course, in our automotive ecosystem, then we not only improve customer satisfaction and delight, but we also are able to help the company we made an investment or acquisition on and obviously able to create a synergy value within the company we require to invest in.

That really helps. My next question would be regarding the marketing spend. So if we compare our marketing spend with some of our competitors like CARS24 or CarDekho, there is a huge gap. So could you throw some light on the philosophy and thought process why we are -- when we have the cash in our books, what is our main thesis and understanding why we are spending so less compared to our other competitors?

Yes. We -- actually, it's a good question. And your marketing costs over the last 5 years have continuously come down per user in absolute basis, if you see. And as we showed you -- I mean, the slide on our Google Trends score, which show the search popularity, where you can see that our search popularity of people searching CarWale versus some of the other brands is so much stronger. And that shows our brand affinity. I think what we've tried to benchmark is our traffic, our traffic growth. And as you can see, 30 million customers a month come to these platforms and 84% come organically. I think one of the reasons why our marketing costs are lower is just our brand affinity and the fact that we can generate such a high volume, 84% or 30 million every month organically, which we don't have to pay for. I would assume that some of the other platforms don't have this level of organic traffic. And I think that is one of the reasons why their marketing costs are much higher, just that our brand affinity is just greater. I think that's the simple answer to this question.

And one last question related to SAMIL. In case of SAMIL, where do we see in terms of the digital and the physical auctions going right now? And why do we see it in the next 2, 3 years? If you can throw some color as to -- since I think we acquired SAMIL in 2018, if I'm not wrong. And how has the journey been, where it is right now? And how do we see it in the next 2, 3 years directionally?

Sure. Yes, we did acquire SAMIL in 2018. That is correct. So we think of SAMIL as a phygital business. The physical aspect is extremely important and a big differentiation for us. We have 130 auto malls now and it provides us a tremendous leverage of infrastructure, which, of course, many of our other players don't have and gives us a clear differentiation. What we want it to be is a physical business, which has large amounts of digital elements to it or a phygital business, right, where vehicles can be kept physically with us because vehicles are very physical. And then we can do a complete online sale for these vehicles, and that's what we're looking to implement. Where we see the big advantage of it being a digital business is a big initiative of ours, which is going on, which is really India's one market. You may be aware that GST rules on used vehicles have been simplified. And now if you buy a vehicle from one state to the other or you bring one vehicle from one state to the other, GST doesn't get incurred again, which makes it viable to be India's one market, right? So typically, you could have a vehicle in Mumbai being bid on by a customer in Gujarat for that matter or Delhi or any other state. And that gives our digital business a tremendous, tremendous opportunity, right? So if there are, as I said, 10,000, 15,000 make model variants of vehicles in the country. And if there's a particular vehicle being sold in Pune, it's not necessary that in Pune the best price for that vehicle gets right. It's possible that a bidder in Coimbatore or Madurai or anywhere in India would bid higher for that vehicle. So the project we're running within, which is really going to benefit for us and where do you think we can dominate the entire used vehicle industry is that we treat India as one market and the auction is 1.2 million vehicles every year, which we do, and we allow every bidder in India to have access to all that inventory, which we do through our online systems, it gives us a very big differentiated advantage. As you say, India is one market and one click purchase, that's one of the biggest objectives within the company. So as I said, it's a phygital business. We like the physical elements, but the digital elements of that business really differentiate us from everything else.

Yes. One last request, it's not a question. If you can throw some more detail about our media business, which I believe is an integral part of our business where we have this business. So if you can throw some more light on the presentation or on the call, if you can throw some more details, that would really help us to understand.

On the media -- what was your question on the media business? Is that the question?

Yes, on the media business.

Yes. So our consumer business is entirely the media business, where we monetize dealers and car manufacturers. It's where the 30 million customers come. And we monetize car manufacturers for advertising and lead generation, it's media business, and we monetize car dealers for lead generation. This is completely -- as a media business, we [indiscernible] into the media money spent by car manufacturers and car dealers as the industry report and our DRHP showed about 13%, 14% of all money spent by manufacturers and dealers are on digital advertising. This is growing and likely to grow in India over the next 4 to 5 years. And really, our revenues come from the digital budgets of car manufacturers and car dealers. As that grows and the car market grows, our revenue then will continue to grow. As we've shown in the stand-alone accounts, that revenue has grown by 35% last year or so.

[Operator Instructions] The next question is from the line of Vijit Jain from Citi.

So Vinay, a couple of questions on the remarketing business. So 4Q is generally seasonally strong for you in the remarketing business, right? And in that context, 2 things look like in the numbers when I see them versus 3Q, there's not a very big growth there. And second, also, when I look at Y-o-Y remarketing business, it looks like commission per vehicle has declined a bit because the auction volumes are still up 20% odd, but the revenues are down slightly versus that. So that's my first question on the remarketing business. And then I'll just ask my question on the consumer business.

Yes. Thank you. So Q-on-Q revenues from Q3 to Q4 is your question really. Q3, Q4 tends to be more or less similar. I think the difference really we had in Q1, Q2 really on one side and Q3, Q4 on the other side. The seasonality is not high. But you got to remember, just now across the businesses, it's been very hard to compare Q-on-Q because of the COVID impact at various stages, right? I think Omicron in January, February, the previous year, you had -- we had April and July really in this current year itself, COVID in the previous year, April to June again. So it's just been hard to really look at any quarter-on-quarter. But the seasonality of the business, there is some seasonality in Q3, Q4 are better than Q2, Q1 normally, but there's not such acute seasonality. I think that's the first question. What was the second question? Sorry, Vijit, I missed the second one.

Just the general commission income that you're probably generating from the vehicle auctions, that number seems to be going down.

That's right. I think what your point is that the volumes have grown to a higher pace than the revenues. The revenues at 20%, I think the volumes have grown by about 40% odd. I think there are 2 things on that. One is that the ticket size is slightly less, number one. Number two, what's happened is that a lot of because of COVID, we have a phygital business. And when we park vehicles physically for this and do an online sale, our charges are much higher. When we just do an online sale, our charges are lower in terms of actual revenue and even though costs are slightly lower, but revenues are also slightly lower. And I think with COVID, what's happened is that our actual take rate per vehicle is slightly lower than the previous 2, 3 years. And that's because it's a -- lot of it went online just because it is very hard to do the physical aspect of it during this COVID period. So I think that's the impact you're seeing.

Okay. Okay. Got it. My question on the consumer business, Vinay is, a, the traffic, how should one think about it going forward? Because Y-o-Y, the traffic number seems to have come off a little bit. And second, so in that context, how are you thinking about the marketing spend here going forward? I know FY '21 you were kicking back marketing to normal levels after -- sorry, FY '22, you're kicking it back to normal levels. So first, that. And second, on abSure, do you have, at this point, any guidance on what kind of volumes you think you will hit once you hit that 120 store run rate -- 120 store count by end FY '23?

Sure. The first thing is the traffic part is, the traffic is quite stable actually at a 30 million number. 30 million is a huge number. You got to remember, the auto industry itself is not growing, right? So for us to grow traffic in absence of the industry, in fact, the 2-wheelers have degrown, there's been dramatic degrowth in the 2-wheeler industry. So we -- somewhere traffic is going to mirror at some point the industry itself, right? I think it's very hard, considering what and how our penetration, right, and digital penetration. No more can we say an auto consumer doesn't go online, right? I think 80%, 90% of customers would go online anyway. And then our penetration is quite high. So I think one thing all of us need is that the auto industry needs to grow. The car industry needs to grow and the 2-wheeler industry needs to grow. I think we've had 2, 3 years of COVID and before that's something else and before that's something else. So the fact of life, I've shown you a 5-year track record of the industry, it's actually flat to degrown. We've, in spite of that, had reasonable growth over a long period of time. And now things to be stable at 30 million. 30 million is a huge number, by the way, per month. This is not per quarter or per year. This is per month, right? So that's the first part. I don't think we're looking at -- the brand affinity strong as we shown you the Google Trends stand. So we don't need to really increase marketing spend at all. We think marketing costs are stable and should stay stable in the future. I think we should not worry about that. That's the first question. The second was -- sorry, I just forget -- sorry, I forget the second. What was the second...

Yes. So my second question was around abSure. So you said you will hit 120 stores?

Yes. So we will go to 120 stores. I think our focus right now is just rolling out across the location. Part of our -- one part of our team is just ramping out. We promised 45 to 50 outlets this year, and we've done that. We want to get to another 75 to 80 outlets in the current year, coming year. And our focus -- one of our teams just focuses on ramping up and getting sure that every customer in multiple cities get access to an abSure vehicle through our online platform, CarWale. And the second part of our team is focused on the operation of the stores, right? How many vehicles, sales per outlet, profitability of the outlet, making sure customer experience is great out there, the car standard, the quality standard of the cars and the customer experience on owning that car is excellent, et cetera, et cetera, the warranty product and all of that, right? At this point, I'm not able to give an average volume per store guidance. But we are focused heavily on making sure the outlets keep growing and stay healthy and profitable. And as I said, these are franchise-owned outlets. They run and owned by dealers. We provide the products, the software products of the certification, the brand, the quality checks, the money back guarantee, the online sale, the technology, software and all those tools and products but basically, the outlets operated by our franchisees. So for us, it's extremely critical that the franchisee makes money. And of course, we make money because we -- actually, because of the asset-light model, we make money very quickly, but it's very important the stores have a minimum volumes that the franchisee is very healthy and makes a lot of money as well.

The next question is from the line of Vimal Gohil from Union AMC.

Sir, my first question is on your stand-alone margins. So basically, just wanted a clarification on while you have clarified on the marketing spend, I just wanted to know what is causing the other expenses, which is about INR 8 crores, INR 8.5 crores, we're running in that run rate per quarter. We were at about INR 4 crores, INR 5 crores a quarter run rate last year. So what's leading that? That's my first question. And the second question is on abSure again. So basically, what kind of take rates are we looking at? Generally, for the used car industry, the take rates hover around 7% to 8%. So since we are in the franchisee model, what are the take rates that we are looking at this point in time? And should we assume similar take rates going forward as well?

Sure. Aneesha, you want to take the operating -- I mean, the other cost issue first, then we can talk about take rate of abSure.

Sure. So on the other expenses for the stand-alone entity, as we pointed out, the quarterly cost is about INR 8 crores as against the INR 5 crores. The INR 5 crores would be your -- average between the 2 is what will be more realistic going forward. I'm sorry, I missed your name...

Vimal.

Vimal, so the INR 8 crores does have some amount of annual entries that we do pass. Also, there is some amount of listing related or expenses that we did incur post listing, which is appearing in the other expenses. Travel and some of the other expenses have gone up recently where we have picked up and gone back to our routine businesses. But otherwise, the expenses are just routine in nature, the increase that you're seeing.

So should we then assume this as a normalized rate going forward?

Yes, you could assume that.

And your outlook on margins for the stand-alone business starts, what's the aspiration guidance, whatever you may probably call it? What is it like? I mean, should we still understand this business to be a very, very nonlinear kind of a business and where there's a very huge upside to margins?

Yes, Aneesha, I'll take that. So I think you're absolutely right. I think it's been a tough year for cost, to be honest. And I think especially it's a tough time when you look at the previous year, right? I think because the previous year costs were all-time low. I think there was no travel costs, manpower increments were frozen and really marketing costs were all-time low. So when you start comparing '21 and '22, it looks like this. And the fact is also you're absolutely correct. Some of the costs in '22 have gone up. And I think the primary reason for that is product tech talent in the consumer business has been just with the amount of money or startups getting funded, one of the challenges has been product tech talent and costs related to that. To me, these are now more stable, I would say. And I would think that this is where it should end up. And these are businesses which have tremendous leverage. So as revenue grows, profitability should grow at a far higher clip. We always like to say that the profit -- if revenues grow by x, the profitability should be x into 1.5 at the same rate, right, except the 1.5. But to be honest, this doesn't show in FY '22, but that's the nature of this business. It has got tremendous leverage around it in terms of increase in revenue and increase in profitability.

Right. Because all said and done, we've still grown at a phenomenal 35% rate. I would have assumed to see some margin expansion at 35% growth.

I completely agree with you. I completely agree with you. And in fact, it's been a tough year for cost, to be honest, just because the base of the previous year has been the challenge, to be honest. It's not so much the actual cost, but it's more the base of the previous year. We feel pretty good that if we had that revenue growth in the future, the profitability should grow at a higher rate than that. We feel pretty good about that.

Perfect. And last question would be just to clarify on that take rate of abSure.

Yes. Yes. So the take rates in abSure for us, the used car margins are right at about 8% to 10% for a dealer. We -- depending on the service we provide to the various abSure dealers, our take rates are between 1.5% to 3%. But we have, as I said, it's completely asset light. So there are very few costs against that.

The next question is from the line of Sachin Dixit from JM Financial.

Congratulations on the -- so quickly on a couple of things. Basically, my first question is with regards to the appearance of COGS or inventory in your financials. So what does this refer to? Can you elaborate on that, please?

Aneesha, you want to clarify?

Sure. So Sachin, this is in relation to the buy and sell, which was hosted under the auction umbrella. There was some portion of our auction revenues where we did buy inventory and sell inventory, which is what is appearing in the purchase stock.

It is more a pilot. I don't think we're doing it going forward.

Yes. This is just a piloting...

We are just piloting a model. It's a very small amount. We're just piloting model.

Okay. Understood. Another question is with regards to the same thing that Vimal was asking about. So on the stand-alone piece, I remember during the last earnings call, you guys mentioned that there is some costs which are on the group level and are being reflected in the stand-alone piece. So that's why we see relatively lower margins there. So can you please explain like roughly where do these margins fall? I believe 5% is still a very low margin for a business of this nature.

That's correct, Sachin. I think what we said was that all our corporate overheads, whether it's just corporate overheads sit in stand-alone accounts, and that's what we said. As I said, Shriram Automall and rest of the subsidiaries, which carry their costs, but basic overhead of the company sits out here. So in a way, it goes all to the consumer business, these costs are debited, right, in the stand-alone accounts. I think that's what you mentioned. I think we continue to maintain that as revenues out here grow, the margin will grow on a -- I mean, in a nonlinear basis, right? Yes. If you look at -- if you look at the stand-alone accounts on its own, the EBITDA margin is 26%. It's when you take out the other income comes down to 5%. But we believe that this is only going to keep growing and get better.

So just to be a clarification on this. So if we try to allocate the corporate cost on both the business analyzing, do we see -- how should the margins improve in that case...

It will change dramatically. It will change. I don't have the exact number that it will change, but you got to remember, SAMIL is not a 100% owned subsidiary. So it's not that we can allocate costs there either. So it is done on a stand-alone -- I mean, they are all allocated in stand-alone cases. I don't have the exact percentage of how -- what impact would it make. But of course, these margins in spite of all the cost being loaded here and not at Shriram Automall.

The next question is from the line of Siddhartha Bera from Nomura.

Sir, my first question is on the stand-alone business again. I mean, if I look at the growth trajectory, on a quarter-on-quarter basis, the industry volumes have definitely improved. But in terms of our revenues, the improvement has been more gradual. So is it that the industry recovery on the advertisement side is taking longer? Or is there any market share changes which are happening? And what is the outlook from here? How much growth do you see can come through for the industry as such in the next year?

Sorry, was your question that the revenues have grown at 35% in the stand-alone? That's clear in the consumer business. What was the question? Was it that the industry is...

Yes, I was more actually looking at the growth maybe on a quarter-on-quarter basis because the COVID impact is not there and the industry volumes are sort of going up. So from that perspective actually a 6% growth...

Actually, the industry last quarter has degrown by 1%. So I don't know if the industry has not grown last quarter. So the car industry has actually degrown by 1% last quarter. But what I'd like to explain just explaining to you, we've grown at 35% for the year. The car industry has actually grown by 11% last year over the previous year. So we've outpaced the car industry growth. I'm actually hoping that in FY '23, the car industry grows at double digits, at least in FY '23. We feel pretty confident that these growth levels with the industry growing or the car industry growing double digit, we feel confident of similar growth rates for the future pretty much, I think, in the range is what we feel comfortable with. But I think the important thing is we all are hoping that we can see a double-digit growth in the car industry for the next few years, actually.

Understood. And sir, on the cost side, like we have seen costs moving up every quarter. So from here on, from these levels, like you said that it should be -- at least on the other expenditure side, should be a sort of number which will sustain. So anything else, how to understand the variable part of the other costs, then how much can remain sort of constant going ahead?

Aneesha, do you want to answer that question?

I'm sorry, I missed that question, Vinay.

I think it's about other expenses, I think. What we expect it to be and what the growth rates of it.

Yes. The Q4 would be the benchmark, Siddhartha, you could assume the Q4 numbers to continue. There won't be substantial growth from there. There will be hardly any growth on the other expenses. The other expenses typically would include your rent and travel kind of expenses. So the Q4 is a realistic benchmark of number that you should expect going forward.

Okay. So there is no lumpy costs which has come in the quarter. These are more of steady-state trends which would continue.

Yes, mostly.

The next question is from the line of Akshay Jogani from Xponent Capital.

I have a couple of questions. First is that if it would be possible going forward or rather can you give us some understanding of the stand-alone business in the sense that how much cost is related to directly to the advertising piece or rather the core new car business and how much to the new projects that we have, which is the financing in abSure, so that we can actually better understand the margins that are coming from the [indiscernible] business essentially. The reason I ask is globally such platforms deliver 30%, 40% EBITDA margin. That's one. Second, I wanted to understand, if I look at Google Trends data, the views or visits show a lot higher on your competitor versus yours. But when we see Google Trends data that you put on your presentation, they show a different trend. So can you just sort of help us understand why there is a difference? Yes, that's the 2 questions.

Sure. So I think the first question is where we're making investments. We are making 2 significant investments, which are of course, factored in our stand-alone accounts. One is on digitization, where we have a whole product team, as I said, and teams actually, not even team working on giving a different customer experience for the future. Now that's an investment, which is to me an operating expense because it's investing in our current business, which is really about making sure when people like you and me come on our platform, today, they get a certain quality of service, which is they get to find their car, select their car, choose a car, understand which car to buy, a whole bunch of work. Tomorrow, we want them to be able to build technologies and tools so that you can comfortably come, not only find your car, select a car, book a car online, get a finance and disburse instantly online or get a resale value for your whole car online instantly. So there are lots of technology and products and tools we are building for which we're hiring multiple teams so that we really -- it's really about investing in the next 2, 3, 5, 10 years for the company, right, for us. It's really our future. These will also bring, as we've talked about earlier, other source of revenue for us in the future. They're not mature enough, but they will bring financing income or insurance income or booking online income or some transaction income, but those revenues are not accruing today. So there are costs being incurred and investments being made for the future. That's one part of it. We treat that today in our stand-alone accounts as operating expenditure because that's being incurred on a daily, monthly, yearly basis. The second thing is the abSure part. The abSure is part of our used car business, but it's slightly different. It's a franchising business. And there also, we are incurring costs today and the revenues don't commensurate those costs. But we are very, very bullish about the future of abSure because it gives the ability to consumer to sit in his home with one click, buy a used car and have it delivered to him or her with a complete assurance and trust which it should carry. And these are investments we are making. And as I said, these are all factored in our margins today. So we are investing in the future. Some of the revenues are not accruing and showing here, but they will start coming up in the current FY '23 and the years after that. So that's the first part. I'm sorry, I forgot the second question. What was the second question?

Yes. So I want to understand the data discrepancy...

Traffic data. Right. The Google Trends is a brand index, which basically says how many people -- what's the search popularity of the brand, which means suppose you go to a browser and you put CarWale versus another competitor of ours, how many people put CarWale versus a competitor. So we are far ahead, which shows a brand affinity. I don't know which third-party websites you've seen, but you may be talking about them showing various visits and traffic. So that's a little different. Google Trends is about really about popularity of the brand itself, the name CarWale, how many -- and that's a reflection of the 84% organic traffic we get and the fact that our marketing costs are low, that's one of the reasons why we are profitable versus our competitors. I think that's the difference.

Sure. But just to kind of double click on that, if your brands popularity is a lot higher, then shouldn't it translate into a lot higher number of visits too.

No, no. But the traffic, you see it better attract. I mean, I don't know, as I said, which party you look at. But if you look at some of them, they ranked us #1 anyway. So I'm not sure which one -- and some other companies are multiple times of the traffic, it's not 1 or 2 times, it's multiple times the traffic...

Yes. No. I mean, traffic on a monthly basis. So I'm talking about a longer trend than a particular month. One more quick follow-up. If I see last year to this year on a stand-alone business, your marketing expenses growth from about INR 111-odd crores to -- I mean, essentially, it's a INR 9 crore growth in marketing expense and revenue growth has been about INR 29 crores, INR 30 crores on an absolute basis. So incremental marketing spend required to get revenue is almost INR [indiscernible] revenue. How should we see this over the next 2 to 3 years?

I think it's a very good question. I feel marketing costs are reasonably stable, I would say. I think last year was an aberration. If you look at our marketing cost current year, it has gone back to 2 years back, right, actually, the marketing costs gone back to pre-COVID levels. Last year, I think it's the same because we shut for -- I mean, business was -- trade was shut, industry was shut for 3 months. The marketing costs look lower than -- because -- just because 3 months there was no advertising. I think that's what it was. So I wouldn't read it too much. I would actually just take the current numbers and say, listen, marketing cost is INR 21 crores on -- INR 19 crores on a revenue of INR 124 crores, and that's the ratio I would use. That's the better way to look at it. Our marketing cost is INR 20 crores on INR 124 crores, that's the percentage we should look at.

The next question is from the line of Devang Mehta from Bay Capital.

This is Ravi from Bay Capital. Just one question from my side. The top line growth at 35% growth in the stand-alone numbers, if you can just talk a bit about what is driving that growth? So is it driven more by OEMs disproportionately spending on digital? Or is it because dealers are sending far more business on digital push towards you? How is -- if you can just talk a bit more about that, it will be very useful for us.

Yes, the growth is coming from actually both sectors. I think there are 2 things which are happening. One is that, of course, there's a little bit more of digital belief among manufacturers and dealers in India. The trade itself has changed, behavior itself is changing because of this whole COVID impact. So even though the industry is on a whole not grown, digital is growing for them. And I think we're just seeing the first signs of it. This is in no means where it will be. I think it will grow at a fast steeper or manufacturers and dealers invest far more digital as they go on -- as the time goes on. So it's coming on both sides. We feel pretty confident that the dealer side looks a lot more positive in the last quarter. But it's -- as I said, both manufacturers and dealers are driving it.

Understood. The second question I just wanted to ask is the trends that you're showing, which is CarWale and how dominant it is versus others, is that also getting reflected in the business that you're getting versus others...

To be honest, Ravi, the businesses are quite different. CARS24, at least some of the other competitors in a very different space of B2C buying that of used cars. I think the only one which is very similar is CarDekho, which has got a media side to it on the new car side, right? The rest of the businesses are quite different. So it's hard to compare. It's not an apples-to-apples comparison.

If you just compare CarWale and CarDekho, is that disproportionate brand advantage is also getting reflected in the kind of media spends that the OEMs or the dealers are doing on your platform versus the other one or...

I think it's been reflected in partly that, yes, the media spend and how they spend also being reflected in the various possibilities of the company and the unit economics of the company. Because traffic is generated by brand affinity or by spending money on advertising too. So I think it's also affecting the unit economics of both businesses.

Last question from my side is just to understand, last year and year before that, we have seen a lot of issues with the industry. Today, when you look at the industry, what is the issue? Is that -- there is a demand side issue because the price has gone up significantly once BS-6 was enforced and the insurance cost and everything. So total cost of ownership has gone up. And then, of course, commodity prices added to that. And then there was also a supply chain issue. What is the current -- in your view, what is the main impediment in front of the industry? Is it demand or is it supply?

In the car industry, it appears at this point, and I say appears for reason better appears because demand is not the issue. Supply is an issue. Semiconductor or supply chain is an issue. For most manufacturers, it seems to be. It also seems clear that if supply was better or semiconductor was not an issue, sales will be much higher than they are today, the new car sales. But I must caution here that these markets or most markets where if the shortage is 3%, 4%, 5% gets magnified, and we all believe the shortage is bigger than it actually is. So I'm not very confident that if we had 5% or 7% more supply, this would be the same situation. It may not be a large gap, just maybe a very minor gap that is getting magnified by -- and seen by all of us. So I think that's one part of it. I think there are concerns around commodity price increases, price escalation, fuel price increases. All these are real, real issues for the auto industry. As I said, we are all hopeful that you have a double-digit growth rate in the car industry for the next 3, 4, 5 years consistently. I mean, not 1 year up, 1 year down kind of which we've had for the last 5 years. We are all hoping and believing that, that will happen. I think the one big pattern which has changed -- or 2 big factors which have changed. One is that car ownership and the right people want to own rather than hire a taxi -- or that's clearly changed. As you can see that in customer behavior. And the second thing, the customer is definitely more digital savvy and so the manufacturer and the dealer, which helps us. So I think these are 2 big changes. But honestly, I would like to see it grow by 10% to 12%. I'm not fully convinced that if the supply was 5% to 10% higher, the demand also exist. I'm not fully convinced, but that is the belief around that the market could sell 10%, 15% more vehicles if cars were available.

Understood. On the 2-wheeler side?

Two-wheeler side, I think price escalation, I think the insurance issue. And that's actually one of the challenges because they're not able to understand fully because I think the supply challenges are very, very -- they're not supply challenges on the 2-wheeler side. It's just the sales are down. And I think that's probably a reflection of this demand being down. I think there is some confusion around electric vehicles and ICE engines and consumers are confused of what the future might be here. But generally, it just seems to be that demand is sluggish.

Understood. In terms of the industry headwinds, this is a great set of numbers. So congratulations.

Thank you.

Thank you so much.

The next question is from the line of Suryanarayanan Manian from DSP Investment Managers.

Just one question I had, Vinay, related to the comment that you made earlier to Vijit's question, which is that this 30 million NAUs, I understand this is on a monthly basis, but are you indicating that this kind of traffic is good enough and you can still try and monetize this base better? That's how growth is going to come? Or at the top of the funnel, you will also need more and more users coming to your site because obviously, engagement metrics and sort of viewership metrics, those need to keep going up, right? So from that perspective, I'm just a little concerned that this number is sort of flatlining.

Yes, it's a good question, Surya. And actually, in our business, we do not monetize all these users. We have something on a fill rate, which means the percentage of the 30 million which we're able to monetize from car manufacturers and car dealers. The limitation for us is not the number of customers. The limitation for us is the amount of monies manufacturers and dealers spend on digital. That's the limitation. So without the increase in traffic, we would rapidly grow our revenues, it is the simple answer. As manufacturers and dealers budgets go up on digital advertising. I think that is the point.

Understood. And the other way is, obviously, if you're able to get them into transacting users and get them...

That's right. And the other way is to monetize the customers better by alternate methods of transaction, financing, insurance, loans because of customers do in both ways. One is monetizing them just as car manufacturers and dealers there because we don't monetize all of them. And the second is of course adding other sources of revenue to the same customer. Both help, actually, you are right.

Got it. And this may not be such a big trend, but just that in terms of the percentage organic traffic that you're getting, it seems to be -- I mean, sequentially coming down a bit over the last 2 to 3 quarters. So is that something that you anticipate will go up and hence, your marketing spend needs to go up just in terms of paid...

No, we don't think the marketing costs will go up significantly. But anything -- this at the 30 million, 84% is very, very high. It's not normal. 88% was very extremely high, too. So I think these are minor fluctuations that take place. I would think it will be reasonably stable at these levels.

Okay. Do you have like any cutoff in mind before you intervene? Or how do you think about that?

Not really. Not really. I don't think we try and worry about it being at 88% to 84%, 85%. It doesn't really matter. As I said, our traffic being at 29 and 31. These are very minor fluctuations.

The next question is from the line of Nikhil Kale from Axis Capital.

No, my questions have been answered.

The next question is from the line of Bhargav from Emkay Global.

Are you able to hear me?

Yes, we can hear you.

Yes. So as you have mentioned that 14% of your -- of the OEM spends are digital. I just want to know how much of this revenue comes to the auto portal? And maybe what's the market share of CarWale of that spend -- of those auto portals?

Yes. So 14% -- the total amount spent is about, I think about INR 6,500 crores, INR 7,000 crores. 14% of that would be about INR 850 crores a year. Our stand-alone accounts show INR 123 crores. So that's the simple answer what CarWale is [indiscernible] INR 850 crores, INR 123 crores, right? That's one part. Where is the balance INR 700 crores growing is mostly -- to be honest, mostly going to horizontals. It's all digital spends. It could go to any horizontal like a Google, Facebook or it could go to YouTube or it could go to timesofindia.com or any kind of digital asset horizontal in the country, right? So but CarWale is 120 out of INR 840 crores or INR 850 crores. Aneesha would that be correct? I think that's...

Yes, Vinay.

Ladies and gentlemen, due to time constraints, that was the last question for today. I now hand the conference over to Mr. Vinay Vinod Sanghi for closing comments.

I just want to thank everybody for joining the call. And it's been -- for everybody in India, it's been -- it's quite a challenging year with 2 years of COVID. The industry has gone through a very specific challenge of supply constraints and through semiconductors and other supply chain issues. But we are all on the back. The whole industry is getting back to normal, and we are really happy that we've had a year where the foundation has got stronger. There's been a reasonably robust 28% growth rate in spite of all the market situation. So we're feeling very confident in the future. And we're very excited that in the next year, we should do a lot more things to help our customers and consumers as well. Once again, thank you for joining in, and we'll talk again soon. Bye-bye.

Thank you.

Thank you. On behalf of CarTrade Tech Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.