CarTrade Tech Limited (CARTRADE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to CarTrade Tech Limited Q2 and H1 FY '24 Earnings Conference Call. 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 Sanghi, Chairman and Managing Director for CarTrade Tech Limited. Thank you, and over to you, sir.

Thank you. I want to welcome all of you to this earnings call for CarTrade Tech. It's been an extremely exciting quarter for us, where, as we've earlier announced, acquired OLX' business in India. And obviously, we are very excited about the future potential of that business. Some of the things we talk through today and compare some of the numbers, they may not be all comparable just because there's been 50 days of OLX' operations in our financial statements. But we'll try and clarify through multiples reports, try and clarify all of this to you. So once again, thank you for joining. I want to go straight on the presentation we have shared to Page #5. I just want to highlight, we've seen a 44% growth in revenue in the quarter, and our profit after tax has gone to 132%. We continue to be the #1 portal in India. We're also now one of the leading classified businesses in India. 70 million MAUs per month, monthly active users across OLX, CarWale and other platforms of ours, more than 100 million downloads. So really, I mean, all our platforms are strong brands. And the great part about all these 70 million MAUs, 90% is organic, which means we pay very little marketing costs to bring these users onboard. A lot of it is just brand and -- brand and relevant search. We have 350 physical locations now after the OLX acquisition. So AutoMall, abSure and OLX stores make up these 350 physical locations. 1.2 million vehicles, at a run rate of 1.2 million vehicles we have auctioned through last quarter. Revenue jumped up, of course, to INR 148 crores in the quarter. And this is net revenue. This is not GMV or turnover. This is just net revenue. EBITDA is about INR 32 crores for the last quarter. PAT is about INR 13 crores. And we continue to be strong, had a strong cash balance, almost INR 700 crores and, of course, debt free. If you go to the next slide, which is Slide 7, which talks about consolidated results till September '23, this is including OLX. So the growth for the first 6 months is 32% and quarter-on-quarter is 44%. Of course, there's some OLX numbers in there. EBITDA for the 6 monthly, 30%. Quarter's is slightly muted at 4%, but there are some OLX numbers in there as well. PBT is up 78% for 6 months and 13% for the quarter. And again, that's a factor of some OLX-related costs there and PAT is up 132% versus 200% for the 6 months. So that's Slide #7. If we go to the next slide, which is really without OLX and looking at the 3-month and 6-month performance, revenue has been tough at about 9% to 10% in the 6 months or 3 months, and that's been on the back of Shriram AutoMall, the remarketing business having a flattish period as we've been talking about in the earlier calls as well. So the net revenue has grown 14%, 6 months; 9% quarter-on-quarter. Adjusted EBITDA is up 31%, 6 months and about 6% quarter-on-quarter. And in that, there has been some costs related to our diligence of OLX as well attached for the -- in the quarter and, therefore, EBITDA is slightly lower. PBT is up 26% and 88%. And of course, PAT is up 164% and 218%. So all in all, CarWale -- or the consumer group has seen some level of growth. Shriram AutoMall has been slightly muted growth, has been flattish. And the OLX numbers have added in the quarter, showing a largish growth for the business. If you go to the next slide, which is stand-alone results for the quarter and for 6 months, which includes most of the consumer business for CarWale's business. Six-month growth is about 25%. The net revenue from operations for 3 months is 22%. EBITDA is up 55% for 6 months, 9% for the quarter. Again, you've got some costs -- onetime costs built in related to diligence on the acquisition. The adjusted EBITDA, we take out other income, has gone up 26% and 51% for the 6-month period. If you look at -- PAT is up 36% and 146% for 6 months. If you look at the PAT of 36% on a stand-alone basis, I think a big factor here, the growth would be even higher is because last year, there was an INR 6 crore dividend -- internal dividend from Shriram AutoMall to CarTrade Tech and that is -- the comparison is showing 36%, will be much higher if we normalize it for the dividend. It comes to almost 1,000% growth in PAT. So that's the stand-alone results. The next slide is the remarketing of consolidated results of Shriram AutoMall. And that's where you see 2% growth in the quarter, minus 3% for 6 months. EBITDA is also a 3% growth for the quarter and plus 6% for 6 months. Overall, flattish PAT and PBT, slightly down but flattish, PAT down 3% for the quarter. This is really the concern for us still where we feel now -- we see the quarter revenue and quarter EBITDA seems to have bottomed out from the last 3, 4 quarters. Even here, when we talk about the repossession business coming down, in fact, the repossession business has now come down to a share of 48% from 57% last year, so 48% of the business we repossessed, which was 58% -- 57% last year. So from 57% of our total volume, the repossession only is 48%. And our retail business has gone to 38% from 31%. So as our retail supply to Shriram AutoMall goes up, the repossession business is coming down. If you go to the slide on OLX, and I want to spend some time here. As we have discussed on the call earlier, when we acquired Sobek Auto, which owned OLX' classified business and OLX' C2B transaction business, we bought 2 businesses within the same company. The classified business in the last quarter has shown a revenue of INR 23 crores, but this revenue is only for 50 days and a profit -- or a profit of -- and PAT of INR 10.6 crores, so it's a high-margin business for us. And as I said, this is only for a 50-day period. On the other hand, the transaction -- C2B transaction business on a revenue of INR 12 crores has shown a loss of INR 13 crores for the same period. So the classified business showed a profit of INR 10 crores. The transaction business showed a loss of INR 13 crores. As you may have read in our public announcement and statements a few weeks ago and as we even talked on the call earlier, we have now, in the last 2 weeks, shut down the -- and scaled down the transaction business and, obviously, therefore, in an attempt to do 2 things. One is focus on the classified business we remain extremely optimistic about, which is having -- which brings in all those 34 million, 35 million unique users per month and has a strong, strong presence in the market for used cars to other products and goods. And therefore, classified business is something we want to continue to invest behind and back. And we have scaled down or brought down to 0 the C2B transaction business in an attempt to obviously bring down the loss-making part of the acquisition. This has already been initiated. And we believe, in this quarter, it will completely be done. In order to bring it down or close it, there may be an approximate cost of INR 25 crores, onetime cost to shut down the business. And I think what would the normalized business -- or the normalized financial of the business will really come in from the Jan to March quarter after this onetime cost has been incurred, where the classified business and its unit economics and the growth from there will continue to work. So I think this is something which we've indicated in the past and now completed -- in the process of completion. And therefore, this acquisition, which are 2 parts of it, the classified business and the transaction business, will now only have a classified business and which has an automotive side to it and a nonautomotive side. And we're extremely excited about both those businesses, which we'll continue to now -- which is what we'll continue to invest behind and grow. Obviously, as you can see in these numbers, this is the profitable side of the business, and the intent was to bring down the losses from the loss-making side of the business. And as I said, by December end, this action should be complete. Also, what we had indicated in the last call was that we have a onetime tech cost of approximately INR 10 crores per month. We had indicated that it might take us 6 months to do the entire technology transfer, which is part of our purchase contract to get the entire tech transferred over a period of 6 months. We feel that, today, that is likely to happen 3 months before schedule. And rather than incurring a 6-month cost of INR 10 crores per month, which is again onetime, it will be only for 3 months. And therefore, from January, our tech costs will also dramatically come down. So we feel good about the fact that the losses of the transaction business, where we incurred some onetime cost this quarter, the October to December quarter, would come down in the Jan to March quarter as well as the onetime tech costs, which were being incurred from October to December, will probably not spill over to January and only the 3 months. So these are 2 major points of announcement on the acquisition. As we continue to look at the acquisition, work on it with the teams there, we seem even more excited about the acquisition from what we were when we assessed it. So we continue to -- as I said, we continue to invest in the classified business and continue to grow it. I want to add here that within this -- within the Sobek Auto acquisition, the classified side has a huge used car part. As you all know, CarWale is the other used car classified player in the country. CarWale, of course, as you also know, is 84% new and 16% used, and OLX' used car side is very, very significant to the entire used car industry. So we feel really, really excited about the whole OLX classified business. So this is -- on the next slide, you have Google Trends and as it shows, CarWale continues to be well ahead of its peers. We've also this time given Google Trends versus its other competitors, Quikr, and you can clearly see where OLX stands, 68:1, clearly, having a leadership in the whole classified space, automotive and nonautomotive. So this is what I wanted to highlight. I'm happy to go into a Q&A or question-and-answer session to elaborate or clarify any doubts on the financials or the acquisition of OLX in India and solve all your doubts and questions.

[Operator Instructions] The first question is from the line of Sachin Dixit from JM Financial.

Congrats on closing the acquisition so quickly and also deciding the future of acquisition business. Quickly, I wanted to understand, in the P&L that you have shared for OLX, where is the production and tech expense parked right now?

In the last quarter, we didn't have this global product-tech cost until September end. It was very minimal, and therefore, there was very minimal cost. As I said in the last call, it will come on 1st October and we actually originally anticipated will be INR 10 crores a month from 1st October to 1st April. But because of the progress we made, we believe it will only be for 3 months. So it is not really there in the P&L we shared because it didn't exist at that time. It's not there in the last quarter.

Understood. Understood.

It's very minimal. It's very minimal. It's not significant.

We're able to see it in this quarter and then it should die down...

Yes, it will be a onetime INR 30 crores this quarter. And so this quarter with INR 30 crores of tech cost and some shutting down costs is going to be -- had two extraordinary items. But yes, from 1st April, the acquisition will have -- will be absent of, of course, the onetime shutting costs as well as the tech costs will come down dramatically from there. And I wanted to add here that although we clarified this earlier that when we acquired the company for a consideration of INR 523 crores, some of these things were known and were almost considerations made at the time of purchase as well.

I think you meant from 1st January, there will be no tech costs?

Yes. We originally thought it will be till 1st April, but now it's probably 1st January. Yes.

And the INR 25 crore onetime cost that you just mentioned, does it include the tech costs or it's on top of it?

No, no, it's not. The tech cost has nothing to do with this. The tech transfer costs and tech migration is on the classified business and the transaction business. This onetime shutting is just shutting the transaction business. I mean it's various contract terminations, et cetera, et cetera.

And any inventory losses or anything that might come up because you might be liquidating some of the vehicles?

It's all in that INR 25 crores we've ascertained to you. It's all in that...

Great. Yes, sounds good. Just one more question on the piece of remarketing business, right? Obviously, you mentioned like it looks like it's bottoming out. You might have seen some data for the last 1.5 months as well. Where do you see that tracking? Secondly, when you say retail for remarketing business, does this only have individuals or this is just anyone who is not an OEM or a bank?

Yes, sure. So the repossessed business, to be honest, is -- last quarter has been flattish over the previous year, right, a little bit -- so what's clear is that it's bottoming out, but it's not clear it's growing. That is the difference. And whether it takes 1 month or 3 months or 6 months, it's hard for us to predict at this stage, just that it seems like the asset quality of people lending in the automotive sector is just good. It just seems like that. Now is that a reflection of the industry at large? Is it a reflection of India as a country at this point? It's hard to tell, but that is the reality. So we actually focus a lot on going on the retail side, which is the second part of your question. And that supply comes from individuals like you and me. It comes from small operators, but it's basically -- most people -- one vehicle being brought in at the time, not like an institutional times, may give us 2,000, 1,000 or 500 vehicles a month. Not like that.

Sure. Just one final question on the OLX piece. Again, is there any color that you can provide on historicals? I know you guys are providing for this quarter for which you have consolidated, but we don't have any context there.

Sorry, you mean historical on what? I can but what -- historical what?

Of OLX business, like how did this business do in the last year, last -- I mean, whatever period you can provide?

So we've actually -- the numbers we've given you in the first 2 months, and we've also given some rough run rate projection in -- of the business in July, right, when we acquired the company. Classified business roughly at that time, we had given you clocked about INR 170 crores to INR 180 crores revenue a year. With a stand-alone, without tech built-in cost, so a profit of INR 100 crores, INR 110 crores. And that's just been the historical way it's been. What we want to do, obviously -- and then there was the transaction business, which had a net revenue of about INR 100 crores, a little more over that and a loss of INR 100 crores, right? So -- and then there were tech costs below this. Now what we've tried to do is say, listen, it's really hard to fix the unit economics of the transaction business, and therefore, we're willing to forsake that INR 100 crore revenue and the INR 100 crore loss goes with it, right? So in a way, it leaves us with the classified business with a profit. And to be honest, that's one of the reasons we acquired the company because we're really excited about the classified business. And within that classified business, a very large part of it is used cars, right, which is what we -- obviously, the huge synergy for us as a business, which affects all our other businesses as well. Now what is over and above that? Is there's going to be some tech and corporate overhead, which will come into the classified business, which has been charged to the transaction business? And a lot of this will get normalized on the January quarter because, in this quarter, we had 2 onetime costs, right, the tech transfer costs, which is completely to do with transfer of -- during the -- tech platform due to the acquisition and the onetime shutdown costs of the transaction business. Does this answer your question?

So I basically wanted color on previous years, right? So just for how the business done historically, that's what I meant.

So some of it is hard for us to give because we actually have bought the classified business in a business transfer contract.

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

Congratulations. It looks like a decent growth across core businesses as well as congratulations on the OLX deal again. My question is, first, I'm just curious, was this always the plan when you were acquiring the company to take a hard look at the used car business and share it down? And was that -- I'm just wondering, was that something that came from process that you had to consider or buy both the businesses together? That's my first question, and then I had a couple of other questions.

No, I think when we bought the company, we looked at the classified business, which we were really excited about. And it had a used cars website, which was hugely synergistic. And then they had this consumer business, transaction business, of course, loss making, but they were pretty good at it in terms of customer experience and many other parameters and metrics. For us, when we bought it, at first -- we obviously had 2, 3 choices. One is to buy and fix it, the unit economics. Second was scale it down and bring down the losses. And third was to shut it, right? I think we did think of all these 3 things over the last 4 -- 3, 4, 5 months. Eventually came to the conclusion that this is going to be hard to fix the way it's run now. Not to say, here, we're not running a C2B business. It's just that we don't want to run it the way of all the processes, which are being followed in the past. We still think there's a huge C2B part in India. The consumer want to sell cars. And I don't know whether you know but OLX is probably -- it is not only -- it is the largest platform, which car sellers use to sell their cars even today on the classified side. Millions of people list their cars every year to sell on OLX. It's the #1 platform for car sellers. What we actually -- what we could not fix is the C2B auction model, right, which is auctioning these cars out. We continue to be in the C2B business and even C2C business on the classified side. As time goes on, we will look at how we can continue the C2B business in a different form. It's just that we didn't think that this model -- the unit economics can be fixed at all. And actually, this is not just us. It came from the team at OLX too.

Got it. Understood. And then my next question is it's a slightly different variation of, I guess, what Sachin was trying to ask. But just trying to get a sense of what the underlying growth in this classified business is for you. And like you gave these metrics around users, unique visitors and engagement and those kinds of things. What kind of metrics should we expect to see on the OLX side of the business and the growth trends? And I also have a question that I would like to ask on the margin side, but maybe if you can answer this first.

Yes, perfect. So for us, when we looked at the business -- and OLX has had the classified business. I don't talk about transaction business growth because it will not be relevant anymore. Even though it had rapid growth, it may not be relevant anymore because it doesn't exist now. When you look at the classified business, it had reasonable growth in revenues, high growth in profitability over the last 3 quarters. As I said, these numbers is a BTA, so we don't have all the facts of it, but -- since this transfer -- it was sold in a business transfer contract. This is one part of it. The second part I want to highlight here is we remain extremely excited about the used car classified side, which we believe we can grow -- we can keep growing over a long period of time, OLX being the leading player in the country. OLX has multiple other categories like real estate, electronics, mobile, 2 wheelers, which also we're extremely dominant at. There's -- actually if you want to sell something in India. Outside OLX are very -- almost no other platforms in India. So we've seen the huge monetization opportunity. And that's got nothing to do with the past. It's just what we believe about OLX, right, a revenue of INR 180 crores or INR 190 crores of classified revenue. We believe there's a rapid growth capability over here itself. But this is one part of it. The second part of it is, I think, when you look at CarWale, SAMIL, both the companies, they tend to grow over the last few years about 20%, 25% net revenue and profitability is maybe slightly higher. We believe that now we've bought something, which is almost 40% of our size, right, automatically. So in a way, if you look at the revenue of the business, it goes up by 40% automatically on day 1. Our question now comes around is there going to be some focus around the unit economics of the business and the margin structure in the business as well. So not only are we saying that OLX will help us grow revenues, which it already has and will continue to do so by growing itself as well. SAMIL will go independently as well and so will CarWale, but we also believe that the combined unit economics should get better and better every day. So it's like almost growing OLX, growing -- the combined entity, growing just because of the acquisition and OLX' growth and CarWale and SAMIL's growth and then getting the unit economics and margins to improve in all these businesses. And OLX' nature of the business is very similar to CarWale, where increase in revenue does not need to be an increase in cost. The metrics to measure would be things like traffic, of course, related revenue, EBITDA, profits, all the same metrics we always declare for CarWale. Very similar businesses. One is just a horizontal and one is a vertical business. That's it.

Got it, Vinay. And Vinay, my last question is, so in the classified financial thread that you guys have shared, I can see the adjusted EBITDA margin is 47%, and you are reporting INR 10 crores -- INR 11 crores of profit for the 50-day period, right? So if I'm just going to be a bit approximate, maybe INR 9 crores -- INR 8 crores, INR 9 crores of EBITDA on a monthly basis versus the PBT cost that you say you will incur of about INR 10 crores per month in the next 3 months. So I'm just trying to wonder...

This is actually -- and I'll explain this why. This is only because the tech is being operated in a global OLX platform, not in our own environment that transfers on 31st December. And therefore, it's a onetime cost -- actually, it was supposed to be for 6 months, now down to 3, which we're committed to incur on -- as part of the purchase transaction. It doesn't mean we'll incur that cost tomorrow. That's my only point.

Yes. So my question, when I was -- what should we think of as more run rate once January comes? Is the margins in the 20% handle you think, so INR 10 crores of EBITDA minus, say, INR 5 crores of PBT in your own hands, and so you get like 20% handle on margins? Is that how we should think about it?

Yes, it may take some time. To be honest, it may take some time, the transfer. We do anticipate that there are 2 things will happen. One, the PBT costs will come down dramatically, I would think. Probably it's between 30% and 50% -- it's probably 40% to 50% of what they are, number one. It's hard for us to estimate would that transfer to not fully happen. And the second thing which could happen is that there is some corporate overhead going to come here because they're all sitting in the transaction business. We want to continue investing. See, if we were not looking to invest in OLX classified at all, then what we would get would be this. But we want to make sure there's a vibrant product tech team, management team, adding to the team to make sure this run rate revenue grows at rapid rate. We don't want to keep it dormant. We believe in this business. And so there is some investment in overhead, which we'll do in this business. But that will be -- the overhead will automatically start paying for itself very quickly. It might take 2, 3 months, but very quickly will start paying for itself. Not that we anticipate losses at all in the next quarter, but the profit might be a little more muted when than think of it. That's what I'm saying.

Got it. My last question...

In the very short term, yes.

My very last question, Vinay, if you can, from an overall company perspective, give some color on product road map, product development plans in the next 1 year post this acquisition, not just for OLX but also for CarWale and everything? And related to that, I suppose, the auto cycle seems to be recovering. Are you seeing signs of that in your own business?

I think the auto cycle has recovered. I won't say recovering. But to be honest, I think our focus -- and I'm just looking OLX as well as CarWale. CarWale is 84% new, 16% used. OLX is 100% used in everything, and out of that 100% used, almost 45% to 50% is used cars. For us, our #1 focus here between CarWale and OLX, we have a very high share of used classified business. Our #1 objective on product development and capabilities then is really to start growing the used classified business on both sides, CarWale as well as OLX, and product related to that. So on the CarWale side, we've always said we're trying to get closer to the transaction, more on moving from a place where you can just find your car and select your car to really buying a car. And that development is underway and continuously making improvements on that on every side. I think on OLX, too, I think we're going to go and invest in product capability, not only used classified side, but OLX is very, very strong on 2 wheelers, electronics and mobile phones, real estate, et cetera, and start looking at those categories to have disproportionate growth in them as well. So right now, as I said, we're setting up new product teams in OLX. There are about 44 people in the product team right now. They're still setting it up. And once the tech transfer's done, we should have a good product team out there, which starts building differentiated cutting-edge technology for OLX for many, many years to come.

[Operator Instructions] The next question is from Siddhartha Bera from Nomura.

Sir, I just wanted to check on this improvement in the unique visitors we have seen in the quarter. It's been quite a good improvement compared to the last quarter. So any thoughts what is driving this? And given this backdrop, do we expect that the revenue growth trend, which we are seeing in the stand-alone business of close to 22% for quite some time now, that can have some upside here also as well in the medium term?

Yes, the growth rate seems to be this for the last few quarters. The last year was much higher. But generally, this is the growth of new car -- CarWale, which is 84% new cars. I think that what I said earlier is we feel that actually new car business has been pretty strong in the first 6 months of the year across the industry, and supply seems to be good. In fact, there was a period 1.5 years ago, where supply was lower than demand. Today, demand -- supply is good and demand is as good actually. So it's just a very good place to be in the new car industry for everyone, including us. There are no shortages as such, but at the same time, supply -- demand is pretty good, and supply is pretty high. I think this trend is probably going to continue for a while. Where we see and where we are focused on and might take a few months is really the used car side of CarWale and used car side of OLX, where we see a lot of positive growth and what we're working on. I come back and the used car industry has been very buoyant as well. We really see that CarWale numbers on the used car side as well as OLX numbers on used car side going up.

Got it. And second is on the synergy side. So I understand on the cost side, but on the revenue side also, do you see there is -- there will be some synergies, which we can sort of derive post this acquisition or transition of the OLX into our system? And what are the areas and how much can that go up to?

The main synergy is used car business, right, because that's where the overlap exists. And again, as I come back, we basically see -- whether you can add CarWale and OLX and give a much stronger product out to all the dealers in India who use classified products. And that's where we see the #1 synergy between the 2 companies. But we see a significant, significant upside in the next year, 2 years in this business.

The next question is from the line of [ Payal Shah ] from Billion Securities.

Sir, I have 2 questions. One being on the remarketing business. So FY '23 was a year of degrowth for the auction business on the back of multiple factors like Mahindra incidents, higher ASPs for used cars, et cetera. So I just wanted to understand that H1 FY '23 has been relatively flat. So how does the remainder of FY '24 and '25 look like for this segment of the business?

Yes. Actually, the 6 months has been tough, and I think it's -- a lot has been due to the fall in the repossessed business. I think there's also been growth on the other side of the business because the waterfall here has been made up by the retail business in other businesses. We are hoping that things turn around probably in this quarter, the next quarter because the repossessed numbers seem to have bottomed out. And as I said in the previous calls that even though the repossessed business is down, we made a lot of efforts elsewhere. And when the reprocessed business does come back, whether it takes 3 months or 6 months, we'll be a much stronger company, and I think we keep saying that. So we -- I don't want to give any growth guidance, but we do believe that, in the next 3 to 6 months, Shriram AutoMall will be in a much better place than it is today.

Okay. Sir, my next question would be like CarWale has approximately 35-plus million monthly unique visitors, which is similar to the average visitors on OLX. So what is the number of visitors we aim to get once the 2 platforms come under 1 umbrella because there will definitely be an overlap between these visitors too?

So there's no intent to bring them under one umbrella. olx.in and OLX, the app, will continue to function as they are. CarWale and its products will continue to function as they are. Many people come to CarWale -- as I say, 84% people come to CarWale for new cars. 100% people come to OLX for used cars. So the users or the consumers or people who come, come for different reasons. Like someone like me and you might go to CarWale to buy a new car or -- and someone like you and me will go to OLX to buy a used car or sell a car or even buy a refrigerator or sell a refrigerator. So it's just the different platforms and used by different people for different purposes. But as I said, the engagement metrics are different. The methodology of acquiring is different. 70% people coming on OLX comes through an app that they download on their phone. And then they use it on multiple things. They use it from selling a car to a 2 wheeler to buying a -- so far to different reasons. Today, someone's moving houses and want to sell 3 items in their house, whether it's a computer or a sofa or refrigerator. They go onto OLX. So OLX is a very different place in the heart of consumers. And CarWale is a different place. If you want to buy an INR 10 lakh new car, you're going to go to CarWale for that. So both of them are going to function independently and both have to grow independently.

The next question is from the line of [ Pankaj Bobade ], an individual investor.

[ Pankaj ], can you hear us?

Yes, I can hear. Am I audible?

Yes.

Okay. Well, congrats for a good set of results.

Thank you, [ Pankaj ].

Just wanted to understand, we are closing down the C2B business, which had gross revenues of INR 194-odd crores and net revenues of INR 12-odd crores. So -- and we have paid around INR 523 crores, INR 500-plus crores for the whole business. So did we not overvalue the business at the time of purchasing it?

No, we don't feel that because in our estimation or valuation, we have factored many of these things into account of the transaction business and the classified business. So we actually feel that we -- when we valued it, we arrived at fair value, keeping some of the considerations in mind.

Okay. Now when we are closing it down, are we [Technical Difficulty].

Go ahead, [ Pankaj ]. Sorry?

Unfortunately, I think he is having some issue with his line. [Operator Instructions] The next question is from the line of [ Yug Mehta from AB Capital ].

My first question would be on abSure and signature outlets. In the last call, you've mentioned the number of outlets being 120 plus. What is the number of outlets now? And how do you see this ramping up?

Yes. I think it is a similar number. I did stress that we also have now over 100 OLX similar kind of outlets, so we actually doubled our stores already. In the next month or 2 months, we're working on a strategy around the 110, 120, which are the CarWale and 110, 120 which are the OLX and figuring out whether -- what we should do with the combined 230, 240 stores. So one other thing which OLX has done is given us a lot of decent distribution as well through these stores.

Okay. Okay. Owning to the acquisition of OLX, a significant portion of our cash has been deployed, thus other income will significantly be lower. So by when do we expect the returns from this transaction to cover that shortfall?

No, that's a very good question. [ In all centers ], we've lost a certain amount of other income, which is obviously because we've deployed a large amount of cash to the transaction. We do believe that in the -- it will take some time, but definitely in the short to medium term, OLX will more than compensate for the losses we have in interest income. But we do feel conscious about that.

Also, what are the company's plans for the remaining INR 600-plus crores on the book? Any other acquisitions in store?

At this point, honestly, we are just looking at the consolidation of OLX, the tech transfer, the growth of the classified business, the integration with our current businesses and growing our current businesses. If something did come up in the future, we'll look at it. But at this point, the whole focus is on getting this right.

[Operator Instructions] The next question is from the line of Sachin Dixit from JM Financials.

I will add a couple of follow-up questions. So the first one being when the plan, at least -- that the communicated plan was that we will have OLX transactions as well as classified, then also you were saying the product and tech expense will fall by 40% to 60%. Now that transactions have gone, I was expecting maybe a sharper drop in that expense. But even now, you are saying 40% to 50% decline only?

No, it's possible, Sachin. What you're saying is correct and is possible. It's hard to assess at this point, but it is possible.

All right. And secondly, on the 110-odd OLX stores, I believe those are part of OLX autos, again, the transaction business. So when you're shutting it down...

No, that is not part of the transaction business. That is part of the classified business.

That's part of classifieds?

That's right.

Okay. Okay. Sure. On the OLX classified piece, now honestly, there is a lot of competition in the non-auto portion of OLX, right? I mean mobiles and all maybe, but I believe last time, you guys mentioned 15% of the revenue actually comes from real estate. Looking at the number of real estate portals that exist in India, like how much sustainable or how much moated is the other revenue on OLX, other than autos?

So of course, auto, there's a very high level of market share and relevance to the used car dealer today. You talk to used car dealers, they'll tell you a large part of their sale is OLX dependent. The other categories -- in fact, the main categories I'll talk through, one is mobile phones and electronics. I don't think there's any other verticalized or horizontal player which is able to cater to millions of people who come on to this platform to sell their mobile phone or electronic device, right? So they're a consumer or a dealer. So a very large amount of traffic comes from seller of mobile phones and electronics. The third category they've got is, 2 wheelers, again, very, very high percentage of users sell their used -- their 2 wheeler on OLX and, again, consumers and dealers as well. So -- and people want to buy these products, whether electronics, mobile phones or 2 wheelers, need to come to OLX to get that business or the supply source available. So yes, whether it's used cars, mobiles, electronics and 2 wheelers, this is the model, like the situation. When you come to something like real estate, which is another reasonably strong category for them, there are 2 types of real estate advertisers. One is the user, like you and me, who have got a flat to sell or a property to sell or -- which is like a resale, which is almost not like a new development. OLX is only on the resale side today, which is existing homes being sold. A lot of the other real estate sites are on new developments, which is new developers advertising. It's almost like CarWale on the new car side, the new -- other websites or the new development side. OLX is 100% on the home side, which is my house and your house, single homes side. And on that side, they've got reasonable market share and strength. That's where their strength is. So segmentation is different, but I'll just try to explain all these categories and talk you through what OLX' strength is.

And my understanding was even for secondary sale and rental also, we have decent number of portals. But anyways, moving on, on the monetization piece for OLX classified, my guess is most of it is coming from either used car dealer or a shop owner or people like those. How much would the breakdown according to you will be between individuals like you and me versus someone who's running a business out of it?

Clearly, on the car side, the breakdown is evident for us because they'll be computed. When it comes to mobile phones and fragmented supply, it's hard to tell who's the user and who's a dealer, right? It's very hard because you can go on the platform and pay and list. But as I said, on the car side, a significant part. I would say 75%, 80% is from dealers. On the other categories, it's very hard for us to comment at this time how much is users and dealers. But on either side, we've seen from the platform, the traction is fantastic, and there's a lot of opportunity to improve monetization and performance for the users, I mean, from the users and for the users. I think it's a massive, massive opportunity across categories, not just cars.

Sir, those are the questions.

I think we've given some numbers out earlier in our press, but we get 35 million -- I need a correction if I'm wrong, 35 million listings a year.

Yes. I have those numbers. It was just on the monetization...

You look at the number, right, and you say, my god, 35 million, that's a very large number.

The next question is from the line of [ Sanjay Sood ], who's an individual investor.

Congrats, Vinay.

Thank you.

I just wanted to understand what is the ROI period for this acquisition.

What is the ROI? Sorry, what is the ROI?

Return on investment.

Yes. At this point, immediately at this point, it's hard to quantify our ROI investment. But when I look at the ROI investment over a long period of time, we believe -- obviously, we have our own hurdle rate in the company of what return it should give the parent and then, of course, the shareholders. But we believe there is significant value creation for CarTrade Tech shareholders. OLX is, if you look at the multiples of the valuation in terms of revenue terms or even any other terms, it's a reasonably cost acquisition. And we do believe that the amount of synergy it adds and its own -- and on its own feet and own strength is going to have tremendous value to us over the next 3 to 5 years.

Okay. And one request from my side. If you can provide used car sale data on monthly basis, like what basically major OEMs are providing this data. Since you have grown big now and becoming bigger, hopefully, so it will be making some sense for all of us to understand we are moving in this direction.

I understand. Since we're a classified platform, what we -- we currently provide an auction platform. We provide sales data on the used vehicle side. But here on the classified side, we'll try and provide some other proxies so that you get a good idea of the used car business and its metrics if that's okay.

Okay. And then last, just wanted to understand, you have closed down the C2B business. What exactly it used to do because I have not understood what it was?

Sure. What it did was if you list your car on OLX and millions of people a year list their car on OLX, a small percentage of them wanted to auction their vehicle to dealers. So what they had done was built an electronic exchange where what they would do is, first, they'll come to your house and inspect the vehicle. And then they would auction your vehicle to a large number of dealers in India, would bid for it. And then they will pick up that vehicle from you and give it to that dealer and make their margin in between. I think that is the model. We just found that the whole cost to operating it -- first of all, the very few percentage of OLX customers wanted it. But more than that, we found the cost of inspecting it from you, collecting it, delivering to a dealer and the margin made in between, the unit economics was very broken. That's what we found.

Okay. So like it is not like Shriram AutoMall business?

It is actually -- the auction business, Shriram AutoMall, is similar, but Shriram AutoMall is actually -- got very high scale in what it does, and it's got its own location. So it doesn't go to your house to inspect, but people bring in vehicles to the specific locations for auction. So slightly different -- the business is similar. The execution of Shriram AutoMall is far more efficient.

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

I have two questions. So one, just looking at the stand-alone revenues and P&L this quarter, right? So your adjusted EBITDA, excluding other income, is about INR 6 crores. And if I remember right, there's INR 1 crore of provision for the due diligence stuff done here, right? So should we think of the EBITDA -- adjusted EBITDA, excluding other income sustainable number here at INR 7.3 crore roughly? That's a pretty -- that's again a pretty decent jump Y-o-Y, Q-o-Q. And I can see your costs. If I look at it in that lens, have been fairly controlled. So just your thoughts on whether that's the...

Is it [indiscernible] or was it higher? I just want to check. I think it was INR 1.5 crores. I'm not 100% sure. Aneesha?

For half year, it's INR 1.5 crores, Vinay. I think what it is for Q1...

Yes, but that was probably the correct answer. That will probably be correct, Vijit Jain.

Yes.

Okay. So the due diligence cost was in 1Q, and so it's not a part of 2Q expenses. Is that what you're saying?

No, no, it's both. It's in both area. It's on both.

Okay. Okay. Got it. And the second question I had was I just wanted to understand what do those 100 OLX outlets do for the classified's business? Are they similar to the abSure in terms of model and how it works?

Yes, it is quite similar. I think the way abSure works is abSure is a little more refined. Well, abSure was created so that you could buy a vehicle online on CarWale and the back-end services of -- the products and service or exchange -- warranty and the money back and all that could be on the abSure store. So it was created to enable a whole digital environment to your purchase. I think what OLX did was it had a very premium dealer whom they certified to be an OLX auto dealer. And even though it didn't offer the money back, they offer the warranty, but even don't offer the money back and the online experience, they made it into a curated marketplace within OLX, the classified business and kept growing it out. So these are almost differentiating where they almost adopted these dealers. Again, it's an asset-light model, franchise, dealer owned, dealer operated, dealer working capital, dealer fixed assets, et cetera, et cetera. So very similar. It's just that our vision was slightly different, where we wanted our stores to be really looking at the next phase of our growth a few years from now, where you -- if you and I want to buy a car online, then these are the stores, which should be able to get this entire experience completed in a particular way. They did this with a view of giving a high-quality car to the user. I think that was the intent.

Got it. Understood. And the second question just on the OLX part. So I would imagine and when I look at the app chart, for example, I can see that OLX usually is among the top 10, top 15 apps on both Android and iOS. So is it safe to assume that most of the traffic for OLX comes from the app versus your...

More than 70% -- no, the CarWale was actually 70% -- more than 70%, yes.

So 70% for OLX is apps, while 30% is apps for...

Yes, CarWale would be like about 25%, 30%, maybe something like that. It's probably a little bit reversed. I think that's also partly because OLX is for multiple purposes. CarWale is like a high engagement, onetime -- maybe buying a car is like onetime, so it's a little different. The usage is different.

Yes. And so with -- related to that, obviously in addition to getting a much bigger scale in the used car business, you are also getting a much bigger play in mobile ad space with this. My question is, is there anything from the ad tech products that OLX has built that you think you could use in CarWale? Any thoughts on those kinds of things?

Yes, a lot of cross-learning. I mean very, very early days, but lots of cross-learning on programmatic ad selling to AI, too. There's just so much learning between the 2 teams. But as I said, it's only, I think, day 90 today -- exactly day 89 today actually. So it's just very early days and a lot of time went in, tech transfer and the shutting of the C2B and all of that. So now is really the time for us in the next probably 30 to 60 days to put in these processes in place and people will continuously learn from each other on many of these issues.

Got it. And then because I asked also that -- that also because I'm just wondering, you mentioned that those product development costs will go down by 40% to 50%, possibly more. In general for India Internet, when people -- when companies build all these different kinds of products, ad solutions and whatnot, et cetera, it's usually pretty expensive to build those, right? So from a continuing to support the product and building new products, how confident are you that you would be able to do more?

No, no, I think we are very confident. No, no, very confident on the cost reduction. I think what is...

Both tech cost as well as product development?

Yes, yes, definitely on the tech cost because -- and product development cost because currently, these costs are being incurred by them globally and then being charged to us because it's in their environment. It's not completely correlated to what cost may incur in India for this. So I think the first part is the entire team is now part of our team, which is part of the Sobek Auto OLX team, which is us, not their team handling it, number one. Number two, all the third parties, infrastructure, et cetera, et cetera, created by them is what this platform used. It's slowly, slowly moving to our environment of our infrastructure, et cetera, et cetera. So it's completely different in my mind. In fact, it's hard to quantify fully, but definitely significantly going to be lower than what it was.

Got it. Understood. Those are my questions, and congratulations once again, Vinay, and best of luck.

Thank you, Vijit.

The next question is from the line of [ Pankaj Bobade ], who's an individual investor.

Am I audible now?

[ Pankaj ], yes, you are audible now. We lost you earlier, sorry.

Yes, yes. Just wanted to understand, when we are closing down the CTX, transaction business of Sobek Auto, so what are we going to do with it? I mean I understand that the losses, which were draining out of them, that will be closed down -- plugged down rather. But then it would have some fixed assets, which -- can you -- would we be able to salvage some...

There was no fixed assets in this. I mean of minimal fixed assets because a lot of the places we kept the vehicles were leased properties, and the business was an asset-light business. So it is them auctioning cars on behalf of sellers to dealers. I think the only real asset will be the tech platform itself, which, of course, we have with us. And we'll see what other use we can make in the future. And of course, another asset would be the data and some of the IP related to it, which also we need to welcome in the future. But the intent is to -- so I clarified that earlier on the call. The intent is to shut the current way they operate the C2B business. As I said, a large, large number of people list their car for sale on OLX, which continues. So it's not like we're exiting the C2B business as such. We're exiting the C2B transaction business. So still someone like you can list your car on OLX and sell it to a consumer or to a dealer, which is happening. Millions of people are doing that every year. A small percentage wanted us to auction it in a transaction model, which is what OLX did, which is what is shutting down. It's not the C2B shutting now. It is the C2B transaction business shutting down.

Right. I understand that. What I meant to say that we have paid -- the seller at that time was valuing the whole business and the valuation was done on the overall revenues, right? So for INR 523 crores and a big chunk of that was coming from -- sorry, INR 523 crores, which we valued for the business and a big chunk of revenues was coming from this business. So if we are writing rather, that's...

No, we won't because when we did the valuation for it, we had factored some of the scaling down, et cetera, et cetera.

Gentlemen and ladies, due to time constraint, that was the last question for the day. As there are no further questions, I would like to hand the conference over to the management for closing comments. Over to you, sir or ma'am.

Thank you, and thank you for all of you for being here today. I just want to tell you how excited we are about the last quarter and the acquisition of OLX once again. Happy Diwali to all of you and enjoy your weekend and the festivities ahead. Thank you, everybody. Thank you.

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