Cartrade Tech Ltd Management Discussions

1. Company Review

CarTrade Tech Limited is a multi-channel auto platform with coverage and presence across vehicle types and value-added services. We offer a variety of solutions across the automotive transaction value chain such as the buying, selling, marketing, valuation and financing of new and pre-owned cars, two-wheelers, commercial vehicles and farm and construction equipment. We operate through several platforms: CarWale, CarTrade, Shriram Automall, BikeWale, CarTrade Exchange and Adroit Auto. Our platforms enable new and used automobile customers, vehicle dealerships, vehicle OEMs and other businesses to buy and sell their vehicles in a simple and efficient manner.

CarWale and CarTrade

CarWale and CarTrade provide research services to customers looking for new and used cars and connect them with dealers, OEMs and other partners to sell and buy cars.

In addition, we engage with financing and automotive ancillary companies to offer their products and services.

BikeWale

BikeWale provides research services to customers looking for new and used two-wheelers and connects them with dealers, OEMs, and other partners to sell and buy two-wheelers.

In addition, we engage with financing and automotive ancillary companies to offer their products and services.

Mobility Outlook

Mobility-focused industry intelligence - offering insightful perspectives on the entire mobility ecosystem all in one place.

CarTrade Exchange

CarTrade Exchange is an online auction platform and a used vehicle enterprise resource planning (‘ERP) tool. It is used by consumers, business sellers, dealers, and fleet owners to sell vehicles to automotive dealers and fleet owners. Automotive dealers also use CarTrade Exchange to manage their processes for procurement, inventory management, and customer relationship management (‘CRM).

Shriram Automall

Shriram Automall is an auto auction platform which facilitates sales of pre-owned cars, two-wheelers, commercial vehicles, three-wheelers, and farm and construction equipment.

Adroit Auto

Adroit Auto offers vehicle inspection and valuation services used by insurance companies, banks, and other financial institutions.

We operate under two key segments:

Consumer Group

Our consumer business comprises CarWale, BikeWale and CarTrade where we provide platforms for consumers to research and connect with dealers, OEMs, and other partners to buy and sell new and used vehicles. In addition, we engage with financing and automotive ancillary companies to offer their products and services on these platforms.

Remarketing

Our remarketing business comprises Shriram Automall, CarTrade Exchange and Adroit Auto. At Shriram Automall and CarTrade Exchange, we provide retail sellers, automotive dealers, financial institutions, insurance companies, fleet and individual operators, leasing companies, OEMs and other institutional sellers with fast and convenient solutions to sell their used vehicles at scale. It facilitates sales of pre-owned cars, two-wheelers, commercial vehicles, three-wheelers, and farm and construction equipment. Adroit Auto provides vehicle inspection and valuation services utilised by insurance companies, banks, and other financial institutions.

1.1 Strengths

Leading Marketplace for Automotive Sales with a Synergistic Ecosystem Our custom-built platforms provide an intuitive vehicle buying and selling experience. We offer a variety of solutions across the automotive transaction value chain from discovery and research tools, pricing and auto financing information to connecting consumers with dealers and OEMs for both used and new vehicle purchases. We believe that our end-to-end model allows us to offer a superior solution and experience to all stakeholders, while reducing our cost of operations and enhancing our ability to offer complementary products and services and derive multiple revenue streams from a single customer. We have a large digital and physical presence through our platforms. Our physical and digital reach allows us to utilise insights by combining data from our various platforms and derive synergistic benefits for our business. For example, we use data collected from offline and online transactions on CarWale, CarTrade, CarTrade Exchange, and Shriram Automall, to get insights into vehicle pricing and leverage price and supply differences across India.

Brands and Customer Experience Driving Powerful Network Effects Our brands are trusted by automotive buyers and sellers. Our consumer business platforms, CarWale and BikeWale ranked number one in relative online search popularity compared to our competitors. In the remarketing business, our platform, Shriram Automall is one of the leading used vehicle auction platforms based on the number of vehicles listed for auction. This is a testament to the strength of our brand and the association of trust, quality, and reliability with our products and services.

Proprietary End-to-End Technology Platforms Our end-to-end technology platform has been developed by our in-house team and allows our business model to be scalable and flexible. We leverage our technological capabilities by guiding our customers on their vehicle search, enabling better price discovery, and providing efficient inventory management solutions for used car dealers and institutional sellers.

Focus on Data Science to Provide Superior Solutions Our platforms give us the ability to analyse vehicle sales using data science and proprietary algorithms based on a number of factors, including vehicle-specific information on automotive transactions, vehicle registration records, consumer buying patterns and behaviour, demographic information, and macroeconomic data. The popularity of our platforms allows us to have a large dataset on vehicles in India and help mine accurate insights about vehicle purchasing and selling behaviour in India.

We leverage the data collected on our platforms to provide pricing tools, product reviews and market insights and reports to consumers, dealers, financial institutions and

OEMs through our web and mobile user interfaces. We also rely on insights from our quantitative data analysis to maximise operational metrics. For example, our data allows used car dealers to make educated buying decisions and guides new car dealers in executing trade-ins. We also use data science to maximise relevance of our digital advertisements to visitors on our platforms. We believe that our data analytics-driven decision-making provides us with a key competitive advantage in designing offerings which can be deployed to third parties such as dealers, OEMs, fleet owners, financial institutions, and other stakeholders. We believe that our optimal usage of data also results in superior products and services for our customers, increased business efficiencies for us and our customers, and thus increased profitability for our

Company.

Profitable and Scalable Business Model

Our business model, enabled by our proprietary technology, has made us the first and only automotive digital platform to become profitable in 2019.

We operate on an asset-light business model, operating across 134 automalls, a large majority of which we lease or rent from third parties. Our growing scale has resulted in a decrease in the share of fixed costs. We undertake significant investment in building our digital platforms that can manage considerably increased offerings in a highly capital-efficient manner. Further, we use cash on our balance sheet for strategic acquisitions.

Entrepreneurial Management Team

We have a capable management team with significant industry experience. Our key managerial personnel have an average tenure of thirteen years with us. We are led by our Chairman and Managing Director, Vinay Vinod Sanghi, who has over 32 years of experience in the automobile industry. Under his leadership, our Company has made several strategic acquisitions and successfully integrated these businesses. Our efforts have created a distinct entrepreneurial structure within our organisation, with each of our business lines being managed as an independent profit centre. We strive to motivate our management team by providing them with employee stock options, thereby enabling a strong alignment of their interests with our performance. As a result, we have developed a skilled and experienced pool of talent across our engineering, customer experience, and design, technology, and other departments.

2. Economic Review

2.1 Global Economy

The global economy is on a positive trajectory towards recovery after enduring the pandemic and conflict between

Russia and Ukraine. China, particularly, is experiencing a robust rebound following the reopening of its economy. Between CY 22 and CY 23, advanced economies experienced a slowdown in real GDP growth, with rates dropping from 2.70% to 1.30%. In contrast, emerging markets and developing economies exhibited more steadfast growth, maintaining a growth rate of 4.00% in CY

22 and a projected 3.90% in CY 23. While the slowdown of advanced economies raises concerns about potential challenges, the consistent and resilient performance of emerging markets and developing economies signifies their relative strength during this period.

Outlook

The outlook for the global economy remains uncertain as it navigates through a combination of challenges and opportunities. Heightened global financial conditions pose a potential risk of debt distress in emerging markets. Therefore, restoring price stability and mitigating the burden of living costs have become focal points for economies. Embracing a multi-lateral approach is expected to expedite progress and propel economic growth.

2.2 Indian Economy

Indias economy has experienced impressive growth over the past decade, solidifying its position as a global leader in information technology services, pharmaceutical manufacturing, and agricultural production. The Economic

Survey of FY 23 anticipated a growth rate of 7%, which was surpassed as the Indian economy expanded by 7.2% during the year. This growth was primarily driven by strong performances in the manufacturing, services, and agriculture sectors. Manufacturing grew by 1.3%, services by 8.4%, and agriculture by 4% in FY 23.

To sustain and enhance this growth, the Government prioritised infrastructure development and social welfare programmes, resulting in a noteworthy capital expenditure ofRs. 7.28 lakh crores, marking a substantial increase of

35.4% in FY 23 over the previous year. Despite challenges like inflation resulting from the Russia-Ukraine conflict and rising commodity prices, the implementation of fiscal policies and timely hikes in the policy repo rate by the Reserve Bank of India (RBI) played a vital role in stabilising the economy.

(Source: Ministry of Statistics and Programme Implementation, Reserve Bank of India, Ministry of Agriculture and Farmers Welfare)

Outlook

The Indian economy is expected to continue its robust trajectory in FY 24, with the RBI projecting a GDP growth rate of 6.5%. Indias economy is poised for sustained progress and advancement, leveraging its strengths and effectively addressing challenges. With a rapidly growing population, a diverse and skilled workforce, a thriving technology sector, and a rich cultural heritage, India has the potential to emerge as a formidable presence in the global economy. This positive outlook is supported by key growth drivers such as increased infrastructure spending, large Government schemes like the National Infrastructure Pipeline (NIP) and Gati Shakti, and Indias demographic dividend with a young population. Ongoing policy measures and initiatives aimed at furthering digitalisation, manufacturing, modern agriculture, and self-reliance are fostering sustained economic development. This outlook reflects confidence in the ongoing measures and initiatives aimed at fostering sustained economic development.

(Source: Reserve Bank of India)

3. Industry Review

As a digital automotive platform, we are closely intertwined with the broader digital and e-commerce megatrends, the Indian automotive industry, and the auto-tech sector.

3.1 Indias Digital and E-commerce Trends

Indias digital landscape has witnessed remarkable growth, driven by increased internet and smartphone penetration. The ‘Digital India programme has played a pivotal role in this expansion. The number of active internet connections, having reached to 759 million in CY 22, are projected to reach 900 million by CY 25.

The smartphone user base is predicted to reach 1 billion by FY 26. The increase in internet connections and smartphone users will make it easier for people to access digital services and products. This will lead to an increase in demand for e-commerce platforms, online shopping, and other digital services.

Currently, online retailers cater to 15,000-20,000 out of nearly 100,000 pin codes in the country. Active participation of the 25- to 34-year age group has been prominent on e-commerce platforms, but older individuals have also begun embracing online shopping. However, it is the age group of 15-34 years that comprises the major consumer base of e-commerce.

In terms of geographical distribution, metro cities like Bengaluru, Mumbai, and Delhi account for the highest number of online shopping activities. Nevertheless, less densely populated regions contribute significantly to online sales, indicating a widespread adoption of e-commerce across the country.

Indias online shopper base ranks third globally, with around 180-190 million users in CY 21, set to reach around

400-450 million by CY 27. These advancements have revolutionised Indias e-commerce sector, enabling various commerce segments such as B2B, D2C and C2C. Notably, the D2C and B2B segments have experienced significant growth. As a result, Indias digital sector is expected to achieve a value of US$ 1 trillion by FY 30.

(Source: Economic Times, Bain)

Government Initiatives

The Government of India has set the objective of making India into a digital hub.

High Affordability

India has one of the lowest data prices globally. The cheap affordability enables any digitalisation initiative (from the Government or services by private players) to reach rural India.

Push for FTTH Roll-out

There is a push within the Indian digital ecosystem to adopt and build infrastructure which supports a 5G network. The swiftness of data transfers over a 5G network is expected to increase services such as the swift data transfer speeds enabled by 5G networks, which are expected to support advanced new technologies and services across sectors like healthcare, transportation, manufacturing, and entertainment offered in the Indian digital ecosystem.

3.2 Indian Automotive Industry

The Indian automotive industry accounted for domestic sales of 21.20 million vehicles in FY 23, according to the Society of Indian Automobile Manufacturers (SIAM). However, the industry has faced challenges in recent years from the pandemic, semiconductor shortages, and inflationary pressures, which exacerbated underlying issues. Yet Indias rapid economic expansion breeds optimism. As one of the worlds fastest-growing economies, India could witness exponential increases in automotive production and sales going forward. With a low motorisation rate of just 22 cars per 1,000 people in CY 19, India has significant room for growth compared to 750 cars per 1,000 people in the US. Favourable demographics, a rising middle class, young and aspirational millennials, and increasing access to car financing can drive Indias motorisation rate higher.

While near-term headwinds persist, the outlook is positive for the Indian automotive industry to experience considerable long-term growth, capitalising on the countrys economic rise and large unmet demand.

Growth Drivers for the Automotive Industry

Policy Endorsement	Increasing Need	Infrastructure Backing and Substantial Investment
Initiatives like Make in India, Automotive Mission Plan 2026 will boost the sector Battery swapping policy enables swapping drained	Infrastructure sector drives demand for commercial vehicles Rising incomes and a young population are supporting passenger vehicle demand	The inauguration of NATRAX, Asias longest high-speed vehicle test track, shows Government support for infrastructure crucial for automotive development
batteries with charged ones at designated stations Public sector collaboration for electric vehicle supply equipment (EVSE) infrastructure installation (Source: IBEF)	Increased availability of credit and financing options are stimulating automotive sales	The automobile sector attracted over US$ 33 billion in FDI equity inflows between April 2000 and June 2022, underscoring its appeal for investments Installation of 532 EV charging stations under the FAME scheme demonstrates infrastructure push for enabling widespread EV adoption

Indian Automotive Domestic Sales Trends

The Indian automotive industry saw strong growth in 2023, with domestic sales increasing by 20% year-on-year. All the major categories witnessed double-digit growth, with commercial vehicles leading the way at 34%, followed by passenger vehicles at 27% and two-wheelers at 17%. This growth was supported by several factors such as rising income levels, Government policies, technological advancements, the easing of semiconductor chip supply, and pent-up demand.

The Indian automotive industry is expected to continue its growth in the coming years but at a more moderate pace. In FY 24, domestic sales are expected to grow by 7-9%. This growth will be supported by factors such as rising incomes, increasing urbanisation, and the Governments focus on infrastructure development.

(Source: CareEdge Report, Auto Sector Update April 2023)

Government Initiatives Supporting the Automotive Industry

Battery-Swapping Policy to Promote Electric Vehicles

In the Union Budget FY 23, the Indian Government introduced a battery-swapping policy, allowing drained EV batteries to be exchanged with charged ones at designated charging stations. This initiative aims to enhance the viability of electric vehicles for potential customers.

Expansion of National Highways under the Gati Shakti Plan

The PM Gati Shakti Master Plan has prioritised 100 critical infrastructure gap projects to be developed in FY 24. The Union Budget has allocatedRs. 75,000 crores for bringing these projects to fruition, with the aim of enhancing connectivity and efficiency in transportation networks.

(Source: Press Information Bureau)

Production-Linked Incentives (PLI) to Boost Local Vehicle Manufacturing

In September 2021, the Indian Government issued a notification regarding a PLI scheme for automobile and auto components worthRs. 25,938 crore (US$ 3.49 billion).

This scheme is expected to bring investments of over Rs. 42,500 (US$ 5.74 billion) by 2026.

Establishment of EV Charging Stations through FAME India Scheme

As of July 15, 2022, oil companies under the Ministry of Petroleum and Natural Gas (MoPNG) have installed a total of 532 EV charging stations under the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) India Scheme I & II. This initiative aims to promote the adoption of electric vehicles and bolster the charging infrastructure across the country.

Automotive Mission Plan 2016-26 (AMP 2026) for Sector Growth

The Automotive Mission Plan 2016-26 (AMP 2026) sets an ambitious goal of achieving a four-fold growth in Indias automobile sector, including manufacturers of automobiles, auto components, and tractors. This comprehensive plan aims to drive growth and development in the automotive industry in India. (Source: IBEF)

New Vehicle Market

New car sales have grown by about 28% in FY 23, over FY 22. Frost & Sullivan, in its report India Automotive Outlook 2023-2028, has predicted the new car and new CV market to register a CAGR of 3.8% and 6.7%, respectively.

[Source: RedSeer analysis]

Passenger Vehicle Market

Domestic sales of passenger vehicles rose 29.6% from 3 million units to reach 3.9 million units in FY 23. This growth can be attributed to improved road infrastructure, low-interest rates on car loans, the launch of new feature-rich models, and increasing demand from smaller cities and rural areas. SUVs and MPVs have experienced sustained growth, driven by pent-up demand and new model launches. Sedans exceeded expectations and increased their market share, particularly at the expense of subcompact cars.

Commercial Vehicle Market

Domestic sales of commercial vehicles rose 35.2% from 7.1 lakh units to reach 9.6 lakh units in FY 23. This was driven by robust demand for heavy trucks, supported by the Governments infrastructure push and increased activity in sectors like e-commerce, construction, and mining. Freight rates kept pace with fuel price hikes, ensuring healthy demand. In FY 24, the overall commercial vehicle demand is expected to grow further, influenced by infrastructure development, while factors like interest rates, fuel prices, and inflation remain crucial.

Two-Wheeler Market

The two-wheeler segment dominates the Indian automobile industry with a 79% market share at 15.9 million units in FY

23. The segment is expected to rebound with 8-12% year on year growth in FY 24, reaching around 18 million units, driven by pent-up demand and increasing first-time buyers, especially in rural areas.

Used Vehicle Market

The used car market in India remains at a nascent stage, with substantial room for growth given the current low parc turn rate (total number of used cars sold divided by total volume of cars) of 16%. As such, Indias used car market is forecast to expand rapidly over the next five years at an estimated 11% CAGR, reaching 8.3 million units by FY 26. Driving this high growth will be declining replacement cycles as well as a rising preference among first-time buyers for pre-owned vehicles. With replacement cycles shortening and used cars appealing to many new customers, the nascent Indian used car market is poised for robust growth in the coming years, potentially expanding at double-digit rates to achieve significant scale.

Entry-level models make up around 50% of Indias used car market in terms of volume, given many buyers are first-time owners prioritising low ownership costs. This focus on value shapes a used car market where the typical sale is a 4-year-old, US$ 5,000 entry-level vehicle. The majority are new car owners who opt for inexpensive models to minimise overall costs.

The ratio of used to new cars sold in India is ~1.5 while in the major economies, it is between 2-3. This signals ample room for further development and growth of the Indian used car market.

Used vs New Car Sales Ratio Global Comparison, FY 19 expected to take the market from an estimated 1-1.2 million used commercial vehicle sales in FY 20 to 1.5-1.7 million sales by FY 25.

Used Commercial Vehicle Sales (in mn units)

Used Two-Wheeler Market

The used two-wheeler market in India is poised for rapid growth in sales volumes over the next five years. From an estimated 20 million used two-wheeler sales in FY 20, volumes are forecast to register a 8% CAGR to reach 30 million sales by FY 25.

(Source: RedSeer analysis)

Used Two-Wheeler Sales (in million units)

Auction and Remarketing Services in the Automotive Industry

There is a growing trend in the reliance on the automotive platforms by consumers, fleet operators, banks, financial institutions and others to sell pre-owned vehicle inventory.

Used Cars (Transaction Breakdown)	FY 20 (in million units)
C2C	1.4
B2C	3
Auction and Remarketing*	4.1
Total	8.5

*(Includes Consumer auctions, Bank Repo Auctions, Insurance Salvage, Corporate, Dealer Exchanges, Fleet and Individual Operators, Trade-Ins, and Other Auctions)

In FY 20, an estimated 870,000 cars and commercial vehicles repossessed by banks were auctioned. Additionally, around 170,000 salvaged cars and commercial vehicles were auctioned by insurers in FY 20. As repossessions and salvage volumes rise, more industry players are leveraging automotive marketplaces to clear inventories of pre-owned vehicles. The increase in supply on these platforms highlights their growing importance as efficient sales channels.

CarTrades Auction And Remarketing Opportunity Landscape

Growing used vehicle sales combined with consumers and businesses wanting to sell via organised auction players with online-offline presence makes us well positioned to take advantage. US$ 1.15 billion

Total addressable market for auctions and remarketing²

(^2. Source: RedSeer Analysis, as of FY 20)

The Digital Advertising Market in the Indian Automotive Industry

Globally, both OEMs and dealers spend a significant part of their advertising budgets on digital channels, a trend that is likely to be followed in India. Compared to other countries, Indian car and two-wheeler OEMs spend comparatively less of their advertising budget on digital platforms, indicating significant headroom for growth. Digital marketing spending by OEMs is expected to increase in line with the growth of the digital advertising market in India. Historically, the digital adverting market has achieved strong growth and registered a CAGR of 20% from FY 18 to FY 20. In other words, digital marketing spends by OEMs is expected to achieve its potential and reach a similar level (as a % of advertising budget) as mature markets, such as the US soon. A promising sign of this anticipated growth is the number of used car dealers in India subscribing to paid services on online automotive portals which is expected to increase to 11,000 dealers from 4,000 dealers through

FY 25 at a CAGR of 22%. Further, according to a report by

RedSeer, there are 7,000 to 8,000 new car dealers that are connected online via the OEM network and receive online direct leads through OEMs. Within these, 20% of new car dealers, 1,500 to 2,000 dealers, also use online automotive portals independently for lead generation services and pay for such services. In other words, digital spending by OEMs is expected to be on a high growth trajectory and as a result, automotive platforms are expected to benefit.

Auto OEMs Advertising Spend is Split by Channel,

Indian Auto OEMs (Cars and Two-Wheelers) Ad Spend on Digital, US$ million, FY 18-FY 20

US$ 150	US$ 177	US$ 170
million	million	million

Used Car Dealer Spending on Marketing - International Benchmarks

	USA	Germany	France	UK	India
Year	2017	2019	2018	2019	2020
Online
spend (% of total marketing)	25%	50%	60%	90%	6-8%
Total online	US$ 2.2	US$ 350	US$ 140	US$ 407	US$ 10
spend	billion	million	million	million	million

CarTrades Advertising Opportunity Landscape

The comparative potential of digital marketing expenditure by OEMs compared to other countries, coupled with the increasing digitalisation of the Indian economy, implies that OEMs and dealers are expected to spend more and more on digital automotive platforms such as, CarWale, BikeWale and CarTrade.com among others. The monetisation mechanisms of our consumer group platforms are expected to benefit from this shift and our Company is well-positioned to take advantage of shifting mega-trends.

US$ 1.75 billion

Total addressable market for ad spends³

(³ Source: RedSeer Analysis, as of FY 20)

3.3 Auto-Tech Industry

The auto-tech industry which helps simplify the journey for the stakeholders, in both new car and used car market has seen continued growth. The automotive ecosystem, which is highly fragmented, complex, and inefficient with multiple intermediaries and exchanges, has been ready for change. Online platforms are helping to streamline this ecosystem, by reducing the multiplicity of transactions and bringing stakeholders from across the country on single platforms.

Provide sellers with an enhanced price discovery mechanism and bring trust and transparency to the overall process

Help dealers source quality used cars and financing of inventory

Bring trust and transparency to the buying process, while making it a seamless experience for the buyer

Digitally Transforming Journey across Stakeholders

Customer: The vehicle purchasing process is undergoing a major digital transformation. Everything from researching and browsing before purchase to comparing prices, finding dealers, reviewing financing options, and discovering value-added services is happening online. Similarly, the process of customers selling their vehicles is increasingly becoming digitised. This includes online price discovery, identifying potential buyers and dealers, auctioning the vehicle, receiving payments, and managing the post-sale process.

The digital transformation provides significant value to customers. The benefits include an improved customer experience through more options, transparency, inventory aggregation for easier discovery, intuitive search, faster purchasing, comparison tools, greater convenience, easy access to financing, ease of use, and time savings. Customers can now research, compare, finance, and purchase vehicles completely online, as well as sell their current vehicles through digital channels. Digitalisation is revolutionising how customers buy and sell vehicles.

Dealers and OEMs: Dealers and OEMs have realised the immense value of online platforms for automotive services. They are now utilising these platforms for listings, vehicle sourcing, lead generation, pricing comparisons, transactions, auctions, and value-added offerings like inspections. By leveraging online platforms, dealers and OEMs can acquire customers cheaply, target purchasers accurately, source inventory efficiently, execute trades seamlessly, use floor space effectively, make financing available, and determine optimal pricing. The multitude of benefits has led to greater adoption and investment in automotive online platforms.

financiers: Auto Auto finance, especially in the pre-owned vehicles market, is a highly under-penetrated market, and thus has potential for growth. There is significant headroom for financing penetration in both new and used cars in India. The digital user base provides the right target audience and a means to reach a large and engaged audience, leading to more inquiries with high probability of conversion.

Key Trends to Drive Growth

Digitalisation in dealerships: It is estimated that most new car dealerships are now connected to OEM online networks and benefit from receiving targeted leads through OEMs and auto portals. Additionally, around 4,000 of the approximately 30,000 used car dealerships are already advertising on online auto portals.

Growth in the used car market: Millennial consumer behaviour has led to reduced car ownership periods, with the average ownership duration decreasing from 8-10 years in 2009 to just 3-5 years in 2019. Other factors fuelling used car growth include the transition from BS-IV to BS-VI standards and differential GST rates favouring used car purchases over new ones.

Shifting profit centres: Data monetisation, in-vehicle connectivity, subscriptions, rentals, charging services, and long-term maintenance packages are expected to make up a larger share of profits going forward.

Auto Value-Added Services

The growth in the underlying automobile market, demographic changes, and Government policies have led to steady growth in value-added services like accessories, insurance, financing, inspection, and valuation. They provide huge opportunities in terms of expansion for the online automobile platforms.

Auto Finance

According to a recent report by the RBI, 3,29,522 crores of vehicle loans were outstanding in FY 22. According to the same report, compared to FY 21, outstanding vehicle loans rose by 13.9%, indicating increased financial penetration of the banking sector. However, auto finance, especially in the used vehicle market, remains a highly under-penetrated market. As a stylised fact that indicates this, in FY 20, 17% of used cars were purchased with auto finance compared to 75% for new cars. Moreover, the penetration of auto finance in India is low, as compared to international peers, such as the US.

CarTrades Auto - Finance landscape

The huge headroom for growth in auto finance penetration and the digitalisation initiatives taken by financiers present a large opportunity to our platforms such as, CarWale, CarTrade and BikeWale, given our large customer base, dealer penetration, tech and valuation capabilities. Adroit

Auto aims at increasing financial penetration by providing analytics and quality-based inspections to certify cars. CarWale, CarTrade and BikeWale focus on the consumer side by offering auto finance services on their platform. The focus on both the consumer and supplier of credit, through our platforms, makes us well-positioned to take advantage of increased auto finance penetration.

US$ 1.43 billion

Total addressable market for auto 4 (⁴Source: RedSeer Analysis, as of FY 20)

Accessories (Automotive Aftermarket)

The automotive aftermarket in India has experienced steady growth, primarily driven by stable year-on-year automotive demand and an increase in the vehicle parc turn rate. It is projected that the automotive aftermarket in India will expand from US$ 15.4 billion in FY 20 to US$ 19 billion by FY 26.

Automotive Insurance

Automotive insurance premiums make up around 40% of the total non-life insurance premiums. These premiums exhibited a compound annual growth rate (CAGR) of 12.6% from FY 16 to FY 20, reaching a substantial value of US$ 8.6 billion.

Inspections and Valuations

Inspection and valuation services play a vital role in serving both the used vehicle loan financing industry and the secondary market for insurance renewals. In FY 20, these services were responsible for conducting approximately 6.5 million inspections and valuations.

Total Revenue Pool For Online Automotive Portals

In FY 20, the total addressable market (‘TAM), or the revenue pool for online automotive portals in India was approximately

US$ 14.3 billion as shown below.

The revenue lines for automotive portals are as follows:

Transactions: Take rate/commissions on transactions and auctions/trade-ins

Media: Listing subscriptions and ad revenues from OEMs, dealerships and other advertisers Software services: Marketplace and software solutions for OEMs, dealerships and banks

Others/value-added services: Auto finance, automotive insurance, accessories, servicing and inspections

The growth drivers for the business are our digital ecosystem, product and technology DNA, large consumer base, phygital infrastructure, asset-light and profitable business model.

4. Operational Review

Our areas of operation are bifurcated into two segments: Consumer group Remarketing

4.1 Consumer Group

During FY 23, our consumer group achieved a revenue ofRs. 213 crores, which was 48% of total revenue, while the adjusted EBITDA margin was 38%. Our platforms CarWale and BikeWale both ranked number one on relative online search popularity compared to our competitors. In addition, the platforms received an average monthly unique visitors of 3.4 crores in FY 23, of which 86% were organic. Our healthy revenue and EBITDA figures for the year, are a testament to the resilience and strengths of our business model. We continue to focus on consumer experience and build technology to ensure that all our stakeholders get a world-class experience. This makes our consumer group well-positioned to be on a high growth trajectory going forward.

Rs. 213 crores 48% 36%

Revenue of total revenue Revenue year-on-year growth

4.2 Remarketing

During FY 23, our remarketing business achieved a revenue ofRs. 223 crores which was 52% of the total revenue, with an adjusted EBITDA margin of 23%. We registered an impressive 11+ lakh listings on our auction platforms in FY 23. The synergistic strengths of our remarketing platforms, with Adroit Auto and Shriram Automall working in tandem, make us confident that our remarketing business is well-positioned to scale new heights in the future. Rs. 223 crores 52% 9%

Revenue of total revenue Revenue year-on-year growth

4.3 Outlook

The Indian automotive industry is expected to undergo a sharp recovery in the next few years. The growth driver of this recovery is because of an increase in the size of the middle class, which is projected to lead to a higher demand for both new and used vehicles. This trend translates into healthy growth in vehicle transactions on our platforms. Our business model enables us to take advantage of these opportunities. Our business is asset-light and technology driven. Our balance sheet enables us to make strategic investments and acquisitions. We have plans to increase the products and services on our platforms and create a world-class digital ecosystem in India.

5. Financial Review

Profit and Loss Statement

Particulars	As on March 31, 2023	As on March 31, 2022	Y-o-Y Growth
Income
Revenue from operations	36,373.92	31,272.35	16%
Other income	6,398.25	4,622.67	38%
Total Revenue	42,772.17	35.895.02	19%
Purchase of stock-in-trade (including inventory change)	645.90	875.02	(26%)
Total Net Revenue (A)	42,126.27	35,020.00	20%
Employees benefit expense (excluding ESOP)	17,739.04	14,758.58	20%
Marketing	2,572.31	2,130.03	21%
Other expenses	9,323.36	8,406.00	11%
Total Expenses (B)	29,634.71	25,294.61	17%
Adjusted EBITDA# (C=A-B)	12,491.56	9,725.39	28%
Adjusted EBITDA % (D=C/A)	30%	28%
ESOP (refer to the note below)5	2,793.88	18,518.29	(85%)
Finance cost	767.19	645.21	19%
Depreciation and amortisation expense	2,873.89	2,473.61	16%
Profit Before Tax	6,056.60	(11,911.72)	150%
Tax expenses	850.95	954.57	(11%)
Deferred tax adjustment	1,162.28	(731.09)	259%
PAT	4,043.37	(12,135.20)	133%
Adjusted PAT*	7,999.53	5,652.00	42%

Total Revenue

In FY 23 the total revenue stood atRs. 42,126.27 lakhs which is a 20% year-on-year growth fromRs. 35,020 lakhs in FY 22. The overall growth is contributed by a remarkable 36% growth in the consumer group segment and 9% growth in the remarketing segment despite some headwinds in the latter.

Employees Benefit Expense (Excl. ESOP)

The employees benefit (excl. ESOP) expense saw an increase of 20% in FY 23 toRs. 17,739.04 lakhs as compared toRs. 14,758.58 lakhs in FY 22. This increase in cost is a result of increase in employee head count by 11% and annual salary increments to our existing employees.

Marketing

Although the marketing expenditure increased by 21% to

Rs. 2,572.31 lakhs in FY 23 fromRs. 2,130.03 lakhs in FY 22, it accounted for a consistent 6% of our revenue in FY 23 and FY 22.

Total Expenses

Total expenses increased by 17% toRs. 29,634.71 lakhs compared toRs. 25,294.61 lakhs in the previous year.

Adjusted EBITDA

Adjusted EBITDA stood atRs. 12,491.56 lakhs in FY 23 fromRs. 9,725.39 lakhs in FY 22. This accounts for a remarkable 28% year-on-year growth due to higher revenue growth in comparison to expenditure, thereby resulting in improved contribution margins.

Adjusted EBITDA Margin

We achieved an adjusted EBITDA Margin of 30% compared to 28% last year. This shows our consistency in maintaining our margins and steady growth trajectory.

Adjusted PAT

In FY 23 we recorded our highest ever Adjusted PAT ofRs. 7,999.53 lakhs as compared toRs. 5,652.00 lakhs in FY

22. This accounts for a 42% year-on-year growth. This growth is due to higher revenue growth compared to the increase in expenditure in FY 23.

PAT

In FY 23, we recorded a PAT ofRs. 4,043.37 lakhs as compared to a loss ofRs. 12,135.20 lakhs in FY 22. In addition to the improved EBIDTA margins and growth in the business, our ESOP expenditure has also significantly decreased compared to FY 22, contributing to the profitable results.

#Adjusted EBITDA is calculated as profit before tax, plus depreciation, amortisation expenses and finance costs and . share based payments to employees

5ESOP includes non-cash share-based payment expenses as per the provisions of Ind-AS 102 ‘Share-Based Payments ofRs. 2,793.88 lakhs &Rs. 18,518.29 lakhs for the year ended on March 31, 2023 and March 31, 2022 respectively. In the previous year, of theRs. 18,518 lakhs ESOP charge,Rs. 14,469.15 lakhs was in relation to 1,500,000 options that were granted on March 31, 2021 having a vesting period of 1 year and were fully vested as of March 30, 2022.

*Adjusted PAT is calculated as profit after tax (PAT) plus deferred tax adjustment and ESOP cost

Liquidity Position

Our liquidity position stands atRs. 1,110 crores. This amount is a total of cash and cash equivalents, bank balance, and short-term investments. A strong liquidity position helps in better working capital management that supports the smooth operation of the business.

Key Financial Ratios

Ratios	Units	March 31, 2023	March 31, 2022	Variance %
Debtors turnover ratio	Times	7.82	7.05	10.93
Inventory turnover ratio	Times	10.57	6.25	69.01
Interest coverage ratio		NA	NA	NA
Current ratio	Times	8.14	7.98	1.97
Debt equity ratio		NA	NA	NA
Net profit margin %	%	11.12	(38.80)	128.65
Operating profit margin %	%	15.67	(38.99)	140.20
Return on Net Worth	%	1.93	(6.33)	130.46
Return on capital employed	%	5.28	(11.95)	144.16

Debtors Turnover Ratio

The Debtors turnover ratio is a measure that quantifies a companys effectiveness in collecting its trade receivables. The ratio is arrived at by dividing the net sales by average debtors. Improvement in the collection period has resulted in an improvement in the ratio.

Inventory Turnover Ratio

The inventory turnover ratio is calculated by dividing the cost of goods sold by the average inventory. An increase in the sale of used cars during the year has resulted in an improvement in the ratio.

Net Profit Margin 7

The formula for net profit margin is net profit/(loss) after taxes divided by revenue from operations.

Operating Profit Margin7

Operating profit margin % is arrived at by dividing earnings before interest and tax by revenue from operations.

Return on Net Worth⁷

The ratio is calculated by dividing profit after tax by average shareholders equity.

Return on Capital Employed⁷

The formula for return on capital employed is EBIT divided by capital employed. Capital employed includes tangible net worth, total debt, and deferred tax liability.

7 Increase/ improvement in the ratios is primarily driven by decrease in share-based payment expenses as explained in footnote 5.

6. Risk Management

Amidst an uncertain business environment, we follow a robust framework that identifies internal and external threats, along with development of effective mitigation strategies. We follow an ongoing process, where risk identification, analysis, mitigation, and monitoring are undertaken periodically by the management team and overseen by the Risk Management Committee. Post-assessment mitigation plans are developed, and a report is submitted periodically to the Risk Management

Committee of the Board. We have identified the following risks to our business:

Risks		Mitigation
	Data Security
	Our reliance on digital platforms makes us vulnerable to disruptions or failures of our technology platforms due to software or hardware malfunctions, system implementations or upgrades, computer viruses, third- party security breaches, employee error, misuse, power disruptions or other causes that could lead to extended interruptions of our operations, a corresponding loss of revenue and profits, breaches of data security, loss of intellectual property or critical data, the release and misappropriation of sensitive information, or otherwise impair our operations.	We are constantly in the process of strengthening our digital infrastructure in terms of technical safeguards and ongoing monitoring of new and existing threats. We are focused on ensuring that data security risks are minimised and that it has a minimal impact on our operations.
Operational Risks	Obsolescence
	The 21st century is characterised by rapid technological change, changes in user and customer requirements and preferences, frequent introduction of new services and products embodying new technologies, including apps, and the emergence of new industry standards and practices that could render our existing websites, apps and technology obsolete.	We have invested heavily in our technological capabilities across our platforms. Our balance sheet allows us the space to pursue strategic investments and acquisations, which we can utilise to be on the cutting-edge of technology.
	Competition Risk	We have put mechanisms and metrics
Strategic Risk	The digital automotive ecosystem is competitive, with more and more players expected to enter our industry. Maintaining a leadership position is a critical priority for our business in terms of our brand position. The recognition and reputation of our brands is critical for the growth and continued success of our business.	in place to track our position vis-?-vis our competition. Our strategic priorities in terms of our investments and acquisitions are geared to ensuring our investment case is stronger than our competition.
Regulatory Risk	Regulatory Risks Under regulatory risk, we face threats from our business environment in terms of content liability fraud. Fraudulent postings, profiles or auction lisitings on our websites by some users may cause damage to our reputation and make us vulnerable to claims. In addition, we face regulatory risk in terms of frequent changes in laws that are applicable to us.	We have put in mechanisms and measures to minimise regulatory risk for our Company. We have put in data filters on our platforms to maintain the quality of listings. In addition, we ensure that our organisation is aware and dynamic enough to anticipate and respond to changes in laws and regulation.

7. Technology and Infrastructure

We have an advanced and sophisticated technology platform. Our technology platforms are both scalable and vertically integrated across the entire value chain, which allows us to address each step of the vehicle life cycle. The end-to-end technology platforms largely developed by our in-house team allow us to offer a seamless solution to our customers.

Our business, financial and support applications and databases are primarily deployed using cloud hosting services across multiple providers. These services give us flexibility to quickly provide additional infrastructure resources, either by increasing capacity in the event of increased traffic or deploying infrastructure with different specifications as required for specific applications and allow for business continuity when we face sudden increased demand. Further, our infrastructure is configured such that we can recreate critical infrastructure on another environment when needed to recover from a disaster. Our engineers are responsible for ensuring availability, stability and integrity of our infrastructure.

In addition, we use various automatic disaster mitigation and recovery measures, such as regular and automated backups, monitoring tools and infrastructure components with built-in redundancy.

Further, to ensure redundancy and continuity in the event of an outage at a particular data centre, we deploy our critical applications and databases in at least two locations. In case of a failure at one location, another location will be available to allow continued availability of our applications. Backups of our critical data and application code are automatically maintained at data centres that are geographically isolated from the original data source, allowing us to restore data when needed.

8. Data Security and Privacy

Our data-driven digital platforms operate on an integrated technology infrastructure which is powered by our self-collected data and analytics. Our websites and apps handle millions of user sessions per day and directly deliver the relevant data into our systems. Our team of statisticians and data scientists has developed complex and proprietary algorithms to transform this data into useable information that powers our platforms and scales as traffic increases. We leverage data to increase the effectiveness of our brands, enhance the customer experience, analyse market dynamics at scale, calibrate the search results on our platforms and optimise the inventory management by dealers and OEMs. We present such information through our web and mobile user interface that is immersive, simple and intuitive.

When expanding and operating our technology platforms, we constantly focus on security and reliability. We maintain stringent policies and practices relating to data security, with many of our privacy policies posted on our websites for users. We design our platforms, offerings, and policies to facilitate compliance with evolving privacy and data security laws and regulations. To achieve such resilient technology platforms, we have implemented various state-of-the-art security measures, in particular: Cloud storage Firewalls

Automated backups Encryption of sensitive data Internal audits Penetration and security testing A virtual private network

Information sharing based on a strict need-to know principle Code reviews by peer programmer or team lead Multi-factor authentication

9. Human Resources

We are committed to providing an energetic, enabling, and open work environment for our employees. Our subsidiary,

Shriram Automall, has been certified as a great workplace for the period from February 2023 to February 2024 by the

‘Great Place to Work Institute, India. This is a testament to the value we place on guaranteeing employee satisfaction. As an organisation, we are committed to creating a culture of talent to deliver high quality products in the market place. We recruit talent from various sources, including leading engineering institutions and business schools.

Employee Stock Option Plan (ESOP)

Our ESOP scheme is formulated with the objective of sharing wealth with our employees and is an important part of our employee retention, and compensation programme. They help us meet the dual objective of motivating key employees and retention while aligning their long-term career goals with that of the Company.

At our Company, we place high value on ownership and having an entrepreneurial spirit. Our ESOP is aimed towards fulfiling this objective by ensuring our employees incentives are aligned with our companies.

10. Sustainability Focus

Sustainability forms an integral part of our business model. We empower Indian, smaller businesses such as vehicle dealers, most of whom are local in terms of size and reach, to access a pan-India ecosystem. By bringing transparency, liquidity, and simplicity to the Indian vehicle market, we make this market accessible for everyone. Customers use our portals to research their used or new vehicle purchase online, reducing the need to visit dealerships and thus carbon footprint created during the vehicle buying process. We also educate customers on the fuel efficiency and provide information on fuel efficient options for the vehicles that they are interested in purchasing.

11. Internal Control Systems

We have a strong and well-ingrained internal control framework. The Audit function reassures the Board about the adequacy and efficacy of internal controls, advises management on the dynamic risk landscape, and helps anticipate and mitigate emerging and evolving risks. The internal audit plan is developed in consultation with statutory auditors and focuses on critical risks that matter and that are aligned with the business objectives of the Company. The progress and planning of key internal audit findings are reviewed by the Audit Committee each quarter. The Audit Committee also monitors the status of management actions emanating from internal audit reviews. Our focus continues to be on the automation of internal audit procedures and the use of technologies such as data analytics, artificial intelligence, and machine learning through the implementation of a continuous monitoring tool.

12. Investor Relations

We constantly endeavour to improve our investor services and benchmark our performance against industry best practices. We have a dedicated investor relations desk, which caters to the interest of the investing community through regular contact and by providing timely communication, engaging global investors and shareholders in ongoing management meetings. The Chairman & Managing Director, the Executive Director and Chief Financial Officer, and investor relations team manage and represent our Company in interactions with investors, the media, and various governments. We ensure that all critical information about our Company is available to all investors by uploading such information on our website (www.cartradetech.com). The site contains a dedicated ‘For Investors section where relevant information meant for shareholders is available, including information on the Directors, shareholding pattern, quarterly reports, financial results, annual reports, announcements and various policies. Material developments during the quarter that might impact revenue or earnings are intimated to the stock exchanges and through the website.

13. Cautionary Statement

Some information in this report may contain forward-looking statements, which include statements regarding the Companys expected financial position and results of operations, business plans and prospects, among others, and are generally identified by forward-looking words, such as ‘believe, ‘plan, ‘anticipate, ‘continue, estimate,

‘expect, ‘may, ‘will or other similar words. Forward-looking statements are dependent on assumptions made in good faith, and through our understanding of the external landscape as well as abilities, and believe them to be reasonable in all material respects. However, we caution that actual results, performances or achievements could differ materially from those expressed or implied in such statements. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.