CarTrade Tech Limited (CARTRADE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 and FY '25 Earnings Conference Call of CarTrade Tech Limited. [Operator Instructions] Please note that this conference is being recorded. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performances and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Vinay Sanghi, Chairman and Managing Director of CarTrade Tech Limited. Thank you, and over to you, sir.

Thank you and welcome to all of you in this FY '25 earnings call. Thank you for taking the time this afternoon. I want to first start with the presentation, which is on Slide 3 to start with. I want to communicate to all of you that CarTrade Tech has delivered its best ever revenue and profits in the year. It has delivered a revenue growth of 28% for the year at INR 711 crores and of course, a 627% increase in profit after tax at INR 145 crores. I also want to highlight that 3 of our platforms CarWale, BikeWale and OLX on a year on unique consumer basis get more than 150 million customers, which is a unique achievement to any company in India, but also -- not only in India, but also all over the world. Very few companies have 3 different platforms getting more than 150 million unique customers per year, as I said, on 3 different platforms. What is driving this growth, all our businesses have grown well this year and margins have grown -- increased as well. The consumer group, during the year, quarter-on-quarter grew at 30%, resulting in 100% profit growth. We also achieved a 29% EBITDA margin, which is a benchmark of excellence. The remarketing business of Shriram AutoMall grew at 12%, a 47% increase in profitability, which shows again that it's on its recovery path to growth. And OLX has consistently grown quarter after quarter with a strong 72% growth in profits in quarter 4 last year to this year. If I look at the next slide, which is Slide 4, I just want to reiterate again that we achieved our highest ever profit for the quarter as well at INR 46.1 crores. We're #1 automotive platform in India, #1 used classifieds platform, #1 vehicle option platform. Across all our platforms, we've seen more than -- approximately 74 million customers every month. 95% of them come organically, which shows or drives the margins of the company and show the brand affinity of all the 3 brands, CarWale, OLX and BikeWale. We have 500 plus physical locations, including AutoMall and Adroit stores as well as OLX stores. More than 1.4 million vehicles got auctioned last year. Revenue for Q4 was at INR 189.5 crores, which is highest ever in Q4. Our adjusted EBITDA, which is almost like a cash proxy for the company is at INR 71 crores. Profit after tax, as I said, is INR 46 crores, it's our highest ever profit in any quarter. And as you see, our cash balances have gone up to INR 954 crores. I just want to highlight here that a year ago, the cash balance was close to INR 750 crores, which shows that INR 200 crores of cash profit got added by the company during the year. And I also want to highlight that in Q4 itself, approximately -- cash profit of approximately INR 70 crores got added. If you see the Q3 results, you'll see the cash balance of close to INR 880 crores, which is now INR 954 crores. So it shows the profitability, the unit economics of the company across all its businesses. If I look at the next slide, which is the consolidated results of the company, as I said, the profit of the company grew more than 6x to INR 145 crores during the year. Overall, during the year, revenue grew 28%. EBITDA grew 19%. Margins went from 16% last year to 23% this year and 27% in Q4, which shows the continuous increase in our margins. When you look at profitability itself from last year, INR 24.96 crores in the quarter. This year, INR 46.1 crores in quarter 4. And on an annual basis, we reached INR 145 crores. So all in all, strong results across revenue growth, profitability growth and unit economic growth throughout the year, in not only in a consolidated basis but also individually in each of the businesses. If you look at Slide 6, which is the consumer group of CarWale and BikeWale, quarter has grown 30%, which has led to 123% growth in EBITDA. Again, here, I want to reiterate that shows the operating leverage in the business, there's very little cost increase. You see the cost increase is only about 11% up in total costs. But the profitability has gone up by 123% on a 30% increase in revenue. So overall, even during the year, on a standalone basis, expenses grew only 4%. Again, the 27% increase in revenue, which led to this 279% EBITDA growth during the year. As I said earlier, PAT has grown at 100% for the quarter in the standalone consumer group business. If you look at the remarketing business, the total income is up by 12% in the quarter and the year. Profitability is up by approximately 19% during the quarter and profit after tax up by 47% during the quarter. I think the business has been generally on its back to growth, on a growth track after a few quarters of flattish performance. And we feel very enthusiastic about the prospects of the business in the coming years ahead. If you look at OLX India, in the quarter, grown by 12%, profits up 88%, again shows the operating leverage in the business. And profit after tax gone up by 72%, which is up at INR 15 crores for the quarter. It's also achieved its highest quarter ever during the last quarter. I must reiterate here that the growth of 12% is something we feel confident, which is going to change in the coming quarters and years. A lot of the product initiatives and work we've done are still to play out, and we're very, very optimistic about the future prospects of OLX. If you look at the overall traffic, I just want to highlight the traffic of the consumer group is actually up year-on-year by about 10%. Normally, Q3 is a better quarter in terms of consumer traffic just because of the festival season. And therefore, you see a slight decline from Q3 to Q4. But if you look at Q4 this year versus last year, there's a growth in traffic. So we feel again pretty enthusiastic about or pretty positive about the consumer traction on the consumer group platforms or on OLX. All in all, I would again reiterate that we think with the current year, it's been a quite landmark year for the company. Margins have grown, revenues have grown, profitability has grown, our M&A has stabilized and on the path to doing big things in the future. Shriram AutoMall has bounced back. So we feel generally very enthusiastic about the results of the company and the prospects of the company in the coming years. So this is what I wanted to stress on. As I said, this has probably been a pretty landmark year for the company, and feel very, very excited about the future prospects of the company. I also want to add here that we're making a lot of investments in product and technology across the group, things like, obviously, AI and various other tools for enabling new products to our customers, and that's in OLX and CarWale, BikeWale across our businesses. And a lot of investments we feel in new tech and new products will also help us in the coming years ahead. So of course, all the product and tech investment we're doing is part of our operating costs. But yes, there's a lot of investment going into innovation for all our consumers across all our platforms. This is what I want to start off with. I'm happy to now take up questions from all of you and answer any clarifications or doubts you might have. Thank you.

[Operator Instructions] The first question comes from the line of Vimal Jamnadas Gohil from Alchemy Capital Management Private Limited.

My first Question is on OLX. You acknowledge that you had -- you've taken some initiatives to bring growth back on track. If you could highlight what exactly are these initiatives, if you could detail some of them, that will be great. And also despite lower growth, we've seen OLX's margins despite lower growth expand, not only on a sequential basis but on a Y-o-Y basis as well. So what is causing that? I do see there's a reduction in the employee cost and other expenses. Is there some more room to -- for these reductions? Or is there some restructuring that is still pending since the acquisition happened?

Thanks, Vimal and thanks for the question. I think the first part is when we took over, it's been about 1.5 years since we took over OLX India. And as I said in the earlier calls, a lot of the first 6 months to 8 months was about technology transition, transitioning the platform to our environment. And then in the next 4 to 6 months, we spent tremendous effort in stabilizing the platform and user growth as well as working on the current product and tech and making improvements there on the current technology and product mix for consumers. I think in the last 4, 5 months after having built out the entire technology and product team and stability in the team, we have now started developing additional features products for all our customers on the OLX platform. As you know, OLX has more than 30 million customers a month and close to 180 million to 190 million customers a year. It's a very, very strong digital brand. And our attempt here is now someone's selling, looking to sell a used product, to buy a used product, which is, as I said, in India, it's the only destination or the #1 destination by far to sell a used product, to buy a used product. So the features and products we're looking to add are enabling consumers like you and me to sell a buyer used product. And the multiple, multiple product features which are starting to get created or built for these transactions. We feel pretty confident that in the next, I mean, not only quarters but years, a lot of these value adds will get added to the platform, which should help consumer experience but also has monetization in the company, all of that. So that's the first part of your question. I think the second part is margins have gone up. There is some cost optimization done by us. Generally, we don't think that there's much cost optimization opportunity in the business. The big opportunity is here to grow consumer experience and obviously then monetization et cetera, et cetera.

Vinay, in terms of monetization, that is exactly what I wanted to understand. If you can give us a couple of examples or a couple of instances where you have been able to monetize a few features or you have been able to add a few revenue streams to OLX, if you could just highlight those, that will help.

No, till now -- I'll be honest. Till now, a lot of the revenues, the revenue, actually the sequential revenue increased continuously over the last few quarters, right, as we showed earlier. So even the reality is that lot of what we are doing now is -- or a lot of what we are monetizing right now is not products we're rolling or going to roll out. They are mostly products which existed before where it's a little more of efficiency and optimization, et cetera, et cetera. So we haven't seen a lot of the outcomes of many of the initiatives we've been taking on the product technology side, and that should come, as I said, in the coming quarters and coming years. That's why we feel so enthusiastic about the business, that the business stability and growth in revenue and margin growth has happened before even we have gone ahead and created many more products for improving user experience on the platform.

Understood. Sir, the next question is just a small data point. For F'25, if you could just give us a sense as for the consumer business, what would be the broad breakup of between the actual sales from leads and the sales from used car and the subscription model that we give to the dealers?

No. Aneesha, you want to take this? I think what we normally give, is OEM sales and dealer sales. Aneesha, am I correct? And Aneesha, you want to give numbers?

Yes, which is similar to past trend, which is 65%, 35%.

Yes. The 65%is OEMs and 35% is dealers. Correct.

Yes. In the similar range, which is what we've been disclosing, similar range.

That's right.

And so that continues for FY'25, is that correct?

There's not much change.

Not much change.

The next question is from the line of Vijit Jain from Citigroup.

Congratulations again, another quarter of 30% growth in the consumer business. So my question is, now you have 2 quarters here in the consumer business where the growth has clearly stepped up. My first question is, is your Q-o-Q seasonality here more aligned with auto OEMs, would you say? And related to that, you said last time around, I think, demand supply dynamics in the industry have shifted, and you're seeing benefit of that in your -- in the dealers advertising on your platform and all of those. So do you see the same trend as you look forward into F'26, more inclination from both dealers as well as OEMs to advertise more aggressively on platforms like you? And then finally, related to that, what kind of growth do you think you will -- you can get in F'26? That's my first question on the consumer business.

So let me just answer that. Yes, first, I think normally, we don't see much seasonality Q3, Q4. There's a very odd year where actually the industry saw seasonality, not just us, right? They're in very strong seasonality. October was a very big high for the automotive industry, if you see. And I think we benefited from that. And Q4 actually grown substantially the previous Q4 anyway, right? But we did benefit from a Q3 seasonality, and that's shown in the consumer traffic, right, even with the consumer traffic. Even though we've grown over previous year, the number of impressions on the internet itself, automotive, at least what we see, seems to be less in Q4 than Q3, which shows that there was a very high seasonality this year, more than normal. Although our financials, its very marginal, the seasonality, we see from a profitability standpoint, we almost had a highest ever numbers, right? I mean, actually they're actually at highest ever numbers. So it's not material or it's not significant to us as a company on a consolidated level. But we did -- we have seen the automotive industry a strong -- this time, a stronger than normal seasonality in Q3, Q4, right? Although Q4 has been pretty good as well in spite of that, I mean, to be honest, that's one. The second thing is the OEM dealer part. I think our initial view maybe 1 year or 2 years ago was seeing other examples across the world was like the OEM business grows faster initially and then the dealer business takes over and the OEM business slows down and eventually the dealer business is higher than the OEM business. As this happened, the growth rates are pretty similar. If you can see, the ratios are not changing. So it seems like maybe it's towards India, where it's early stage, early days yet, and the OEM is still heavily investing in digital, right? And therefore, the OEM and the dealer both are growing equally, it seems like that. It's probably the trend, I don't see any reason why the trend won't be the same next year in terms of the OEM dealer share. That's the question.

No, actually, my question was more along the lines of -- so this 30% growth on the consumer business that you've seen in the second half of F'25, do you think the drivers are the same so F'26 would look closer to that in terms of growth rate in consumer business?

I can't give guidance, but I don't think much is changing the industry, to be honest. I mean, it seems that the industry is in the 0% to 5% growth for cars, especially. And most analysts and economists are saying that the FY'26 should be between 0% to 5% growth somewhere in the automotive industry. That's the general view. And I think that might be the view, so it's very similar to last year probably.

Got it. And, Vinay, within this, broadly, I wanted to get your take on what does new launches from companies do here in terms of -- so for example, in the bike segment, if you're seeing a lot of new launches, for example, do you see more advertising activity directly on your platform almost immediately on both bikes as well as car business? And related to that, is bike segment doing better growth in the car segment for you?

Actually, bikes and car had reasonable similar growth this year. But to be fair, the new launches do help spends. I mean, people do spend, more money on -- OEMs do spend more money on launches. So but also to be to be honest, the number of launches per year are not that different. I mean, you have an odd COVID year, et cetera. But generally, otherwise, the number of launches per year are pretty similar. It's not something which is changing.

Right. How about the new energy vehicles? Because I think in some other countries, you've seen new OEMs coming up or new energy vehicles coming up.

They're only in demonstrated bikes and they're very small in terms of market share, right? The number of vehicles being sold by them versus entire 2-wheeler industry is very, very small. So it's not material. If I take out -- if you talk about EVs and I take out Bajaj and TVS, the rest of the lot are even all -- numbers are not big compared to the 2-wheeler industry in terms of size. They're very small, right? And therefore, the spends are very small as well, relatively small, right? So yes, I don't think it's materially it's material yet, whether clean energy kind of vehicles are getting launched. New vehicle launches on the whole, whether ICE or EV or et cetera, hybrids, whatever that might be. It helps anyway. I mean, that's the point.

Got it. And my last question, so in last month or so, we've seen a couple of automotive platforms, websites getting acquired, Team BHP and Autocars, specifically, I think. So your thoughts on those assets? And did you -- I don't know if you can discuss it, but did you consider those acquisitions as well? I think that was my second question.

They're very different. I mean, I don't want to get into whether we consider or not, but they're very different platforms. I mean, the ones you mentioned are more content driven information in places or enthusiast destinations, not really transaction platformed by CarTrade. I mean, and the scale of CarWale or BikeWale versus them is not comparable actually at all. So as I said, CarWale and BikeWale both get more than 150 million customers a year, right? So unique -- it's a different level of scale. So they are more enthusiast kind of platforms. I mean, CarWale is more of -- or BikeWale is more of a place...

Broad based.

To buy a vehicle.

Got it. Understood. And one last question on the Shriram AutoMall. Just I'm trying to understand the Q-o-Q...

[Operator Instructions] The next question is from the line of Siddhartha from Nomura.

Congrats on a good set of numbers. First question, I must say -- first question on this consumer business again. I mean, some color if you have in terms of the industry growth, how has it been, say, last year or maybe last quarter? And where is this instrumental growth coming from? Because like we understand, the industry structure may not change materially in terms of demand supply like we are seeing right now. But in under that construct, how should we look at the growth? Should we expect the current momentum to sustain or some more normalization like we have seen in the last quarter? So some sense if we get will be really helpful.

The industry growth, as you know, is the public information. As I said, industry is growing at a low single digit, right? And generally, the view is that industry likes to grow the same pace the next year. That's the economist or the analyst view. I mean, that will be in that same range. So we don't see any basic market change or any kind of market dynamics change across the industry at all, I think that's the first part. The second part is we continue to play our role, which is helping consumers to buy cars or buy bikes or manufacture the dealers who sell them. And we're continuously building products to enable it, and more so now with a lot of new tools and analytics and AI tools available, et cetera, et cetera. So we're getting closer and closer to solving consumer problems. So we definitely see our role being the same, if not increase in the industry. So -- and we see -- feel very optimistic about the market sentiment and the fact that there is growth in the industry itself. Yes, I would generally be quite positive about the new vehicle market.

Understood, sir. And we have seen a bit of step-up in the marketing expense in the current quarter. Obviously, also seeing some slowdown in that visitors run rate. So do you think this is something seasonal again and will normalize going ahead or probably we need to sort of push marketing a bit higher for -- to drive growth in the coming year?

No, I don't think -- first of all, marketing is a very small part of our cost, right? It's INR 7 crores in the quarter, INR 7.6 crores in the whole quarter in the consumer group, which is about -- just about over 10% of our revenue, right? So, it's not significant. We don't see much variation from here, right, overall in the marketing costs. As I said, the traffic year-on-year is up 10% overall. The reason, one would think that it's down sequentially by about 8%, 9% because this Q3 was a very strong quarter this year, right? I think that was the main reason. It has very disproportional growth in that particular quarter. So there's nothing else that we've seen and the marketing costs are not significant with the company as a whole. And that trend is not likely to change. And it's not like traffic has come down because of competitive reasons. Traffic is slightly down because our searches are down itself, right? It is -- that's what's down. It's not that our market share of traffic is down.

Okay. Got it. So lastly, on the SAMIL business, I mean, we have seen a very healthy 20% growth in the CarTrade vehicles sold, but the revenue growth seems to be a lot lesser than the volume growth. So what is sort of impacting here and how -- when do you think that converges or picks up more going ahead?

Yes. I think, as I said, repossession fees have gone up. Our repossession share has also gone up. It's now about 54% of vehicles of our inventory is repossessed, which have been sold. So it seems like the market trend towards the cyclical part of this -- the cyclical view of it is that it seems that repossession should grow and continue to grow over the next few quarters. Therefore, SAMIL should be able to benefit from that. I mean, that's the way to think about it. Of course, SAMIL again, the thing is any revenue growth dramatically affects profitability, it has high operating leverage to its business costs. Cost growth -- the whole year cost growth is 7%, right? So it does help that we have low cost growth, margin and profitability shoots up.

The next question is from the line of Dhruv Bhatia from Edelweiss Mutual Fund.

Yes. Firstly, I mean, just a data point I wanted to get is bookkeeping question from the remarketing business. Could you just provide what would be the mix between the TV and CV in terms of volume in terms for the quarter and for the full year?

For the remarketing, CV tends to be for us, we've said this before, on the 25% range, roughly, I mean, that tends to be the volume of CV.

Okay. And secondly, just on OLX. The last 6 months, there was a lot of investments since the acquisition in terms of reducing scams on OLX, in terms of starting to verify dealers. And if you could just talk a little bit about what all investments are already done and what all are required to be done to accelerate growth from where we are? Because from a profitability standpoint, I think you've reached a fairly good number. But from here on to drive incremental growth, what are those things that you need to do to get OLX to the next scale?

So, I think the product tech investments, I was saying earlier, there's a lot of investment in product across different areas of the platform. The first is stability of the platform. Imagine there are platforms where 180 million, 190 million Indians come every year, right? It's a massive number. I think it's probably one of the largest in the world of its kind, right? Very few platforms in the world get this number of users. So obviously, the kind of investment we do on stability and product and technology is going to be a global quality and global standard, right? It's probably the best at world in what we do, number one. Number two, when you look at safety or security in the platform, or trust and safety as we call it, there is continuous effort to make sure like every other platform in India does, is making investments and providing an environment where customers can trade or buy products from each other in a trustworthy manner, right, and that's a continuous effort. Then lots of AI tools technology, which we implemented over the last few months, enabling or improving for the security or trust and safety on the platform. So, it's something we continue to do and that's obviously helping the platform itself. We also are looking obviously in the coming months to -- as I said earlier, a lot of other tools and features so that customers can interact and sell and buy used products in a free, easy manner. So that's the intent. And there's continuous innovation going on there to improve or enhance the number of transactions done on the platform.

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

Congrats on the decent set of results. My first question is on basically new auto business side. Obviously, the growth has been good, industry growth is whatever, but the dynamics are favoring you. I wanted to understand competitive dynamics, right. Relatively do you think you are gaining market share over the competition? If yes, what do you think is driving? Are you doing some sort of strategic initiatives where you are creating new products, new benefits for your OEM and dealer partners?

Yes. Basically, obviously, we're continuously working on improving our product and so that we stay ahead of, any other way to buy a vehicle, right, whether it's our auto finance product, which has gained traction on our platforms, whether it is other features we have for consumers. Our focus mostly, Sachin, honestly is to add things on by helping consumers. If we help consumers, then the dealers and manufacturers automatically benefit, right? So we mostly add more and more feature which helps you as a consumer to buy a car or a 2-wheeler in a simple easy manner, right? So whether and like I said, one example is adding our auto finance product. We started 1.5, 2 years ago. This has now started getting us a lot of consumer engagement or different -- every day, there are small, small things on our product and tech we keep adding, enabling, helping consumers find the journey a lot easier, right? And that's a permanent effort. And as I said now, with all the data and all the analytics in our business, how do we add AI as another way of helping a consumer buy a product or buy vehicle online. So there's continuous improvement in effort going on the technology product side. One of the biggest efforts for the year for us internally is further working on a product tech across our group, not just in the consumer group.

Understood. On the same line, basically, are you also looking to cater to, let's say, some of the newer formats right, let's say on social media marketing, et cetera? Or do you have a play there in terms of video advertisement as well compared to the typical display [Technical Difficulty]

The next question is from the line of Nishith Jalan from Axis Capital.

Congratulations on good set of numbers. So 2 questions. Firstly, just wanted to get a sense on the remarketing business. You did mention that repossessed vehicles have started to come back. Any numbers you can say out of the total growth in auction volume around 18%, what was the growth in repossessed and retail segment? Because what I remember [indiscernible] What has been the kind of decline in repossessed vehicles that you have seen in the last 3, 4 years? Because I remember that repossessed vehicle volumes have been coming down consistently while you have scaled up the retail volumes because of which your overall volumes have not suffered much. So if the recovery cycle plays out, I just wanted to understand how, what kind of growth trajectory we can look into the repossessed vehicles in the next 2, 3 years. So that's the reason why I'm asking this question.

It's hard for to predict what might happen on repossession growth or other segment growth in the future. But I'm not giving any guidance. Generally, growth rates are similar across segments. Aneesha, would that be correct? I mean, it's not like repossession has grown faster than other segments. But generally, growth rates are similar across all segments.

Vinay, what I wanted to mean is if you look at if you go back in time when your auction volume used to be 60,000, 70,000 per quarter 3, 4 years back, right? Then what used to be the repossessed vehicles and what is it right now?

No, I don't think the repossession has fully come back in -- no, that's absolutely correct. I don't think repossession has come back to the volumes they were. It's just that from the base they started growing, it doesn't mean it's come back to where it was. That's the question.

That's what I want to understand, to what extent it has come back? So what used to be run rate earlier per quarter and what it is now right now? So that's what I want to understand.

Yes, I understand. I'm not -- I don't think I have the answer to the question right now, but it will not come back to if that's the question. I mean, it definitely has not.

Okay. No worries. I'll take it offline.

So there is opportunity to grow even to come back to its original base. It'll have to grow substantially from it.

Sorry to interrupt. Can you please return to the question queue for follow up.

It's okay. That's related question. Go ahead.

So just wanted to understand on this, our take rate in this segment has come down. Is it more of a function of the percentage take rate coming down or is it like that ASPs in this auction volumes have come...

It's an ASP. There's a little upsurge in 2-wheelers, specifically. And therefore -- and I think that's a reflection of the industry itself. But yes, that's the reason. It's not a percentage, it's probably ASP.

And I had one more question on new cars. Can I ask that or should I go back into the queue?

Okay, quickly, I think. Go ahead.

Sure. So it was more of an industry question. See, when you see customers coming to your website CarWale, BikeWale, what according to your understanding, are customers coming to the website? What are the top 2 or 3 things a customer is coming and spending time on your website? What exactly are they trying to find? And why I'm asking this is now, obviously, you did mention that the BHP, Autocar, they are also car enthusiasts kind of a thing, right? And if they also put on their website a lot of details around new cars, comparison and all those sort of things, don't you think that some traffic will get divided and they might also start taking a bite of the overall advertisement pool or marketing pool from the OEM and the dealer side?

Okay. The first part is why do they come to CarWale or BikeWale. I think people come when they're looking to buy a car or a 2-wheeler come -- it's first of all, it's very significant purchase for anyone in their life cycle, right? I mean, when you look at the house or your car, it's probably a top 1 or 2 purchases you ever have. So it's a highly involved decision to buy a product of this value in India. And therefore, you try and understand what car to buy, from where to buy, what price to pay. Once you go through the hurdles on a platform like, CarWale or BikeWale, you probably try and understand, how to get my loan, can I get my loan sanctioned probably even just my old car for sale, I know what that value is. I think right from the time you start to understand that you want buy a product to the time you actually get it delivered, you'll be deeply integrated with CarWale and its dealer set or its manufacturer set to run you through this process. As I said, we are probably trying to move over the years, we move more from an information provider to a more transaction enabler, right? And I think the next transition of CarWale, BikeWale will be to a transaction doer. Eventually, you'll probably say, listen, you press the button, buy a car, and we deliver it to you. So we're moving from an information provider, transaction enabler to a transaction doer, And that's the transition we're all making. The other couple of places you mentioned are mostly like, as I said, enthusiast/places of content, right, and they've been around forever. I don't think it changes, CarWale's market dynamics because they're not new, both of them been around for many, many years. And also in the scale of users, it's very, very different for different reasons. CarWale gets to users, it does over many, many years because it provides a certain role when someone buys a vehicle, which I think BHP or Autocar provide a different or play a different role. So I don't see that competitive just because they've been acquired. I don't see those dynamics changing at all.

The next question is from the line of Sagar Arya from Xponent Tribe.

Just a couple of questions. First on the consumer group business. Now you've spoken about the inherent operating leverage that is prevalent in our business economics, right? And if you look at the classified business outside of India, so dominant classified business in car classifieds, we operate at north of 40%, 50% EBITDA margin. Even in other categories where there are businesses which dominate in classified business, they operate at significantly higher margins, right? So if we were to continue to grow at the 20% rates or slightly higher than we are anticipating, would you say that we are quite far from saturation of EBITDA margins in our business? And if you were to look at the numbers say 3, 4 years down the line, what would be a realistic target of EBITDA margin that you would have in the car classified business?

I think not only the car classified business, I mean, across the group, in Shriram AutoMall or OLX India. We have tremendous operating leverage in our business. Our costs don't go up in relation to our revenue. Our major costs are only manpower costs, which are mostly fixed in nature, not variable. It is fair to say that our margin is already getting best-in-class in India. We also believe that our margins will get better in the coming years, whether it will reach probably get best-in-class, not only India, best in the world, just as the operating leverage we have in our business. So we feel very confident about margin growth. And we actually -- we've talked to this for the last 2, 3 years as well. I think what we've been able to demonstrate as a company is that margin growth has happened over 2, 3 years continuously quarter by quarter. And we don't see any reason why that would not continue to happen in the future.

So, best in the world is quite an aspiration, right? Like I said, the best in the world are operating significantly higher. So, good to know this. Second, on the OLX piece, while we have a very large base of users who come and user our platform, at least one big challenge in India has been monetization of users, right, where the average revenue per user has been fairly low for a lot of platforms. Do you -- what kind of challenges do you anticipate in monetization of your traffic on OLX? And what are the things that you're doing to improve? But if you could just give us specific examples, that would be very helpful.

I think on OLX, we monetize 2 sets of users, we monetize consumers and we monetize dealers. It is the ARPUs per user or the ARPU per dealer is something which is, in our opinion, only likely to go up in the company, number one, on both cases. And the way we feel the ARPU will go up, I mean, is -- it's principally around providing more products and services to same user, whether you're a consumer who's coming to sell or buy a product, or a dealer who's coming to sell a product. The more we offer, the more ability we give you to perform transactions, the greater the ability to monetize, right, as far as we are concerned. So we believe that monetization is going to grow. Monetization is going to grow with increased products and services delivered to the user. And ARPUs will go up as well. On the other hand, we also believe number of users will go up. So it's a combination of all these things put together.

But is there a specific number you have in mind, say, if you're looking at used cars as an example here? Is there a specific number that you have in mind that will be able to monetize say X percentage of the sale value of a particular transaction?

We obviously want to be very cost effective for a dealer to sell cars on our platform. But we don't have a specific target or goal in mind. We just feel that by offering more or more services and helping dealers sell more cars, which we do, we keep increasing our ARPUs as well as our number of users, both. We actually think there's a limitless opportunity both on used cars or used products on OLX at this point. There's no target in mind. It's just -- you could continuously do this for many, many years ahead. So plus you got to remember the industry itself, the used car industry itself is growing, and also the ARPUs of car itself is growing, the ticket size of cars are growing. So there are a number of market indicators also which should help and benefit the OLX and used products itself.

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

So I had just one more question which was on OLX, right? So something seems to be not working on OLX clearly, right? So at the time of acquisition, we talked about this entity historically has grown around 20%, in the past couple of quarters here around 15%. This quarter we have dropped to 10%. Can you detail more of it? Like so that, we as investor community, like, get understanding of what is happening, why are we where we are and why do you think that we'll recover? Because otherwise, the trend doesn't suggest that way.

No, no. The trend actually suggests that because if you see the financials in previous year to this year, the actual on a yearly basis, OLX has grown at 16%, 12% year-on-year in the quarter, but annually, it's grown at 16%. So we actually feel very optimistic about OLX and we actually think that it's absolutely the right path to where it needs to go. I think what we are also saying is that it takes time to build products and services on a platform of 200 million, 190 million people coming. So what's taken us time is adding products and services to what we do. We feel actually really optimistic about the revenue potential of monetization for this. Even the consumer potential on a number of consumers coming, there's a lot of work going on in the 18 months from an M&A. Just to tell you also, OLX is even higher than our profitability in its history. And it came from many years of loss making background, right, many years of it. So there are a lot of things that we had to do to get it right and get it here. At the same time, grow users, grow monetization and grow revenues. They've always grown. So optimistic, I think, we feel a lot of work on product and technology will be done for building future products and services, which is underway. And then adoption of that, but very, very optimistic about where it's going and where it needs to go.

Got it. And on same line, basically, our employee expense in OLX has dipped by almost 25% when compared to 2Q of this sales, right? What is the nature of this drop? Is it...

No, no, I don't know exact percentage, but...

I think it was roughly INR 20 crores in 2Q, it's now INR 15 crores.

Yes. It is just optimization model. Because when you do an M&A, you don't really need -- you don't know what you need or not. I think we are all new to it in the first year or so. So it's just a little bit of optimization, nothing more than that.

The next question is from the line of Sindhuja from LKR Advisors. [Technical Difficulty] Seems like the line is not audible. We'll move to the next question. The next question is from the line of Palak from MIV Investment Management.

Congrats for the good set of result. So my question is, again, on OLX India. What I understand from the previous communication is that, last 6 months, there have been lot of effort in improving the platform, and now they are thinking about the monetization. But what I'm not able to understand is that now there are 2 ways where we can increase the monetization of the platform. First is the existing revenue that we have for the revenue that is the ad listing fees and subscription maybe. But also, can you help me understand what is our strategic plan? Whether we are thinking of the first step that is to increase the monetization from our existing revenue stream, that is our advertisement or listening fees. And the next part is what are we thinking about the new revenue? Can you give me a set of example? I mean, you gave me -- gave us an example of what are the efforts that we are taking, but how it is going to get converted into the monetization? And specifically, when we are talking about such a huge user base, so what is stopping us from increasing the monetization part? Do you think that the customer stickiness will get impacted with, or there are other platforms that are performing well on this aspect? I mean, because of the competition aspect, you are not increasing the monetization.

Okay. The first part is, OLX is very dominant in used product selling or buying for consumers like you and me or dealers who are selling used products. I don't think from a competitive standpoint that any platform in the country which is even close to what OLX does. As I said, OLX has 130 million customers a month, which is unique -- 190 million a year, which is just unique to itself and its brand. So that's the first part of the competitive side was your question. The second part of what are we doing to increase the growth of revenue you've seen continuously over the last 15 to 18 months is growth in the current monetization models, which are listing fees for consumers and dealers. We haven't had any new revenue streams. It's mostly the growth coming from what we've acquired and the current revenue streams and products and services which we offer. I think our objective is, of course, to add new revenue streams to the business and continue to grow existing streams. The new revenue streams are products which we're still creating. There are multiple products which anyway help you and me to sell a product on OLX or buy a product on OLX. And those are underway. They're still under product development. So in the next few quarters, they'll start rolling out and we obviously expect increased monetization from them.

Okay. So this 17% growth that we are talking about, is this purely from the increase in the monetization? Because I assume that the...

Which growth? Sorry. What number did you say?

It has to a mix of user base increase and monetization. So can you help me understand that how much percentage was due to the user base increase and how much percentage due to the increase in the monetization?

There has been -- I mean, we normally have very marginal rate increases. There are mostly increases on more user engagement or user increases itself. The rate increases are very minimal.

Sir, the only thing that we should start accelerating and charging users more because eventually, when we'll provide them, because services will have to start monetizing that part also. So there has to be a slight acceleration in terms of growth of the amount that we are charging to users.

No. I think what we're trying to do here is add products and services and monetize that. We don't necessarily think the best way to monetize is just to keep increasing rate. I think the intent here is to keep on giving more and more to the user to do more and more transactions and therefore increase our revenues. I think that's the intent here.

Ladies and gentlemen, we will take this as our last question. I would now like to hand the conference over to the management for closing comments.

Thank you all for joining this afternoon, and we feel very enthusiastic and happy about the year gone by and also very optimistic about the year coming ahead. So thank you for joining and look forward to talking to you again soon. Thank you. Goodbye.

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