E-commerce platform for pre-owned vehicles, Cars24 raised nearly a billion dollars and attained a $3.3 billion valuation during FY22. At the same time, the company also witnessed a more than two fold jump in its scale after a dip in FY21 due to the pandemic. But its losses skyrocketed over eight times, outpacing the scale.
Cars24’s holding firm in Singapore holds 12 subsidiaries across India, Australia, UAE, Saudi Arabia, Turkey, Indonesia, and Thailand. The operating revenue (gross) of these entities surged 117.2% to Rs 6,072 crore during FY22 from Rs 2,796 crore FY21, as per the annual financial statements filed by Cars24 in Singapore. To recall, the firm’s scale saw a 12.6% fall in FY21 when compared to FY20.
The sale of used or pre-owned vehicles is the primary revenue source for Cars24, forming 96.6% of their operating revenue. Fintrackr’s analysis shows that income from this vertical surged by 116.6% to Rs 5,868 crore in FY22.
Cars24 also provides financial services to its customers to purchase vehicles. Interest income from loans disbursed and other operating revenue collectively increased 134.5% to Rs 204 crore in FY22. In November, Cars24 disclosed that its financial arm Cars24 Financial Services (CFSPL) disbursed pre-owned car loans worth over Rs 1,000 crore in the last three years. It did not mention FY22 numbers in particular, though the numbers indicate an uptick in FY23. Apart from this, the company recorded Rs 34.7 crore as other income mainly from interest on fixed deposits during the last fiscal year.
Being a used-car selling platform, the purchase of pre-owned vehicles was the largest cost for the company which accounted for 76.3% of the overall expenditure. This share dropped from 84% in FY21.
To keep up with the scale, Cars24 hired more people during FY22. As a result, employee benefit expenses rose around 3X to Rs 700 crore in FY22 from Rs 236 crore in FY21. This includes Rs 111.6 crore as ESOP expenditure. By the end of FY22, Cars24 announced that it would buy Rs 75 crore worth of shares back from employees under its ESOP plan.
Advertisement expenses and contractual manpower costs for the company also increased around 5X and 7.6X respectively to Rs 413 crore and Rs 114 crore in FY22.
The eight-year-old company added another Rs 69 crore as car handling expenditure which pushed the overall costs by 160.6% to Rs 7,942 crore in FY22 from Rs 3,048 crore in FY21.
With over 160% spike in the total expenses, the company’s loss surged 8.3X to Rs 1,834 crore in FY22 from Rs 220 crore in FY21. While ROCE and EBITDA margin worsened to -30.20% and -27.15% respectively in FY22, on a unit level, Cars24 spent Rs 1.31 to earn a single unit of operating revenue.
Besides more than $950 million in funding from the likes of SoftBank, Tencent, and Alpha Wave, Cars24 also laid the foundation of its initial public offering (IPO) plan as it converted itself into a public entity in October 2021. As part of its strategic review, the firm also pulled the plug from its supply focused vertical in about 82 smaller cities. Entrackr exclusively reported both the developments. In May 2022, the company fired over 600 employees saying that it was performance linked exits that happen every year.
Cars24’s closest rival CarDekho registered an 80.7% jump in its gross revenue (revenue from operations) to Rs 1,597 crore in FY22.
Operating in India, expected to become the third largest automotive market worldwide by 2025, besides other key Asian markets (apart from Japan and China) has been the narrative on which most car sales platforms have been built so far. The promise of turning a largely unorganised market into an organised one has also meant that while growth is available, it has usually come at a very high price, as smaller players and brokers find ways to work around the challenge from these startups, with their own methods. But there is no doubt that the broader trend in the market remains in favour of organised players, as regulations continue to push the market to that end. Cars24 is also on a steep learning curve like many of its peers, and will be hoping to translate that to lower losses starting FY24, to target eventual break even or profits in FY25.