CarDekho CFO aims to achieve EBITDA-level profitability ahead of IPO in 2023, CFO News, ETCFO

Mayank Gupta, Group CFO, CarDekhoIn an interview with ETCFO, owned by Girnar Software Mayank Gupta, CFO of CarDekho Group shared its future growth and expansion plans as the company claims to be listed on Indian stock exchanges by next year.

“With scale, leverage, efficiencies and process improvements, we’re looking to contribute to our profitability at overall EBITDA levels, and that’s what we aim to achieve prior to the IPO,” Gupta said ETCFO. In FY23, the company sees healthy growth of 50% to 60% year over year and it comes with plans for growth and expansion.

“We can look at some Gulf Cooperation Council (GCC) countries and the growth path continues,” he said. On the acquisitions side, he said: “We look for relevant opportunities, any good addition to partners – anything that revolves around auto engineering to solve customer challenges in a profitable way, such as: B. services for cars, rental, leasing or new technologies such as electric vehicles are relevant for us.

The edited excerpts:

Q: Not only have inflation and volatility in commodity prices impacted car prices, but many buyers have been told to wait for prices to soften, at such times the used car market has seen an uptick. What impact has your used and new car business had?

Mayank Gupta: The used car industry is quite massive, with nearly four to five lakhs of cars being sold in the country each month. The industry continues to grow in the high double digits.

The used car growth story is long term for us, but pent-up demand, customer need and affordability are macro factors driving the uptrend. And apart from commodity prices, there are many changes in (customer) behavior in COVID times. People, especially the new generation, are much more likely to buy a used car first or second hand.

Inflation in India has historically ranged from 5% to 7%. While it’s on the high end, it’s not significant. In our industry, both new and used cars have different impacts on business. In addition, commodity prices and semiconductor shortages are challenges that have dragged supply chain problems.

In the midst of these challenges, the used car business has developed positively despite rising new car prices. Used cars have become cheaper.

Q: The used car business is a disorganized sector. How many used and unused cars do you trade in a year? What are the challenges as a CFO in this area?

Mayank Gupta: In the used car business, we build our scale to over 30,000 cars a year. However, the challenge between organized and organized is a classic one.

A sector that deals in bulk, we have almost 20,000 dealers in the used car industry in the country. We see this as an advantage because we solve our customers’ problems using products and technical solutions. On a digital platform the choices are endless, secondly it comes with trust and guarantee.

The only challenge in dealing with a disorganized sector is that companies are doing the right things in the right ways and obeying every law, but may not always have the highest level of compliance. This puts pressure on the unit economy, at least in the short term. But over the long term, if you do the right things with scaling, the problem of one-size-fits-all economy will resolve itself.

Q: How do you assess the impact of the holidays on your business this fiscal year and what are your expectations?

Mayank Gupta: The year 2022 will be rock solid. We expect a good season for all of our businesses compared to 2020 which was a hit and 2021 when the economy recovered from the impact of the pandemic.

Q: What is the market penetration strategy in the auto portfolio business when we talk about opportunities in Tier 2 and Tier 3 cities in FY23?

Mayank Gupta: The plan is to maintain tiering in the country. The content and research platform hails from every city in the country and is open to new launches or searches for old car models. It’s operationally tough on the used car transaction side. So we’re going city by city, including tier 2 cities.

In FY23 and beyond, we are aiming for healthy growth – in excess of 50-60% year-on-year, and that comes with plans for growth and expansion. The business model for us is Business to Business to Consumer (B2B2C).

Both our financial services and insurance business will continue to expand inland. When it comes to used car transactions, we want to solve the standard economy city by city. We don’t want to grow for the sake of growth, but logically and sustainably.

Q: CarDekho has also expanded into other regions such as the South Asian markets and operates in Malaysia, the Philippines and Indonesia. What is the expansion plan for the future?

Mayank Gupta: We can look at some Gulf Cooperation Council (GCC) countries as the growth trajectory continues. But our strategy is to make sure we fully solve the product market adjustment in the country before going outside. We wouldn’t want endless growth and later close and shut down these operations.

As such, we have been cautious with our plan, but continue to delve deeper into these markets as well as neighboring countries.

In acquisition, we are reviewing opportunities that are relevant, especially in these times, any good benefit for partners – anything revolving around profitable solving of customer challenges in auto engineering. Car services, rental, leasing or new technologies such as electric vehicles would be relevant for us.

Q: What are the initial public offering (IPO) plans as the company has already announced that it will go public by 2023?

Mayank Gupta: In today’s Indian market as well as global markets, you need to be a profitable technology company. We are focusing our energy on reaching breakeven and then profitability soon and plan to achieve this over the next 12 months. Also plan to do the IPOs around the same time which means that in a year we intend to be listed on the Indian public markets.

We not only prepare in action, but also in our mindset. For example, we started quarterly investor calls for our investors and so on. We carry out initiatives before we go to market, we should be fully prepared for how we run the company.

The single economy remains our main focus. Of our four business lines, auto content research platform is a profitable business, financial services and insurance, we tested the cohorts and showed balanced profitability, now we invest in growth. Having tapped into the equation there, we may soon be profitable. In the used car business, we are trying to build a unified economy and strive for sustainable growth.

With scale, leverage, efficiency and process improvements we are trying to contribute to our profitability at overall EBITDA level and we aim to achieve that before the IPO. By leveraging operational leverage, controlling fixed costs and incremental gross margin, and will have a positive impact on sales.

Q: What is your hiring plan for FY23?

Mayank Gupta: Each of our companies is growing. We have very solid growth plans in Southeast Asia and also strong growth plans in the financial services and insurance businesses. A rental is possible. There’s no specific number in mind, but the macro trend is clearly very positive and we’re actually actively participating in it.