Cars24’s overall sales increased by 2.2X in FY22, but losses exceeded Rs 1,800 Cr
- ByStartupStory | January 27, 2023
Cars24, an e-commerce marketplace for used autos, raised nearly a billion dollars and was valued at $3.3 billion in FY22. At the same time, the company’s size increased more than twofold after a decrease in FY21 due to the pandemic. However, its losses increased eightfold, exceeding the scale.
Cars24’s parent company in Singapore has 12 subsidiaries in India, Australia, the United Arab Emirates, Saudi Arabia, Turkey, Indonesia, and Thailand. According to the annual financial accounts filed by Cars24 in Singapore, the operating revenue (gross) of these firms increased by 117.2% to Rs 6,072 crore in FY22 from Rs 2,796 crore in FY21. Remember that the firm’s scale fell 12.6% in FY21 compared to FY20.
Cars24’s principal revenue source is the selling of used or pre-owned vehicles, accounting for 96.6% of their operating revenue. According to Fintrackr’s study, revenue from this vertical increased by 116.6% to Rs 5,868 crore in FY22.
Cars24 also offers its customers financing for automobile purchases. In FY22, interest income from loans disbursed and other operating revenue increased by 134.5% to Rs 204 crore. Cars24 revealed in November that its financial arm, Cars24 Financial Services (CFSPL), had disbursed pre-owned car loans worth over Rs 1,000 crore in the previous three years. It made no specific reference of FY22 data, while the figures show an increase in FY23. Apart from that, the company earned Rs 34.7 crore in other income in the previous fiscal year, primarily from interest on fixed deposits.
As a used-car selling platform, the purchase of pre-owned vehicles was the company’s largest cost, accounting for 76.3% of total spending. This proportion has decreased from 84% in FY21.
Cars24 employed extra staff in FY22 to keep up with the scale. As a result, employee benefit costs more than tripled to Rs 700 crore in FY22, up from Rs 236 crore in FY21. This figure includes Rs 111.6 crore in ESOP expenses. By the conclusion of FY22, Cars24 declared that the company would purchase back Rs 75 crore in employee stock under its ESOP plan.
Advertisement spending and contractual personnel costs climbed by almost 5X and 7.6X, respectively, to Rs 413 crore and Rs 114 crore in FY22.
The eight-year-old company increased its car handling expenses by Rs 69 crore, increasing overall costs by 160.6% to Rs 7,942 crore in FY22 from Rs 3,048 crore in FY21.
With overall expenses increasing by more than 160%, the company’s loss increased 8.3X to Rs 1,834 crore in FY22 from Rs 220 crore in FY21. While Cars24’s ROCE and EBITDA margins fell to -30.20% and -27.15%, respectively, in FY22, Cars24 spent Rs 1.31 to earn a single unit of operational revenue.
Aside from more than $950 million in funding from SoftBank, Tencent, and Alpha Wave, Cars24 also established the groundwork for its initial public offering (IPO) strategy when it became a public business in October 2021. As part of its strategic evaluation, the company also shut down its supply-focused vertical in 82 smaller locations. Both developments were exclusively reported by Entrackr. In May 2022, the corporation sacked nearly 600 employees, claiming that it was due to annual performance-linked exits.
CarDekho, Cars24’s closest competitor, increased its gross income (revenue from operations) by 80.7% to Rs 1,597 crore in FY22.
Operating in India, which is predicted to become the world’s third largest automotive market by 2025, as well as other significant Asian regions (other than Japan and China), has been the story upon which most vehicle sales platforms have been constructed thus far. The promise of transforming a highly unorganized market into an organized one has also meant that, while development is possible, it usually comes at a steep cost, as smaller companies and brokers discover ways to go around the challenge posed by these firms using their own methods. However, there is no doubt that the overall market trend continues to favor organized firms, as rules continue to push the market in that direction.
Cars24, like many of its counterparts, is on a steep learning curve and will be trying to translate that into fewer losses beginning in FY24, with the goal of eventually breaking even or profiting in FY25.
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