Investors Explore Merger Between CarDekho And CarTrade

Singapore government's investment fund Temasek-backed CarTrade is exploring a merger with rival CarDekho as investors push to create India's largest online auto classifieds portal, two people aware of the development told BloombergQuint.

Amid mounting losses and competition, the investors want to focus on profitability, one of the persons quoted above said requesting anonymity as the talks are private. For CarTrade Temasek and private equity fund Warburg Pincus are exploring a deal, while Sequoia Capital is driving the talks from CarDekho, the person said.

Temasek is looking to invest close to $100 million, with majority of the funds earmarked for a secondary sale, the second person quoted above said. The deal has hit a roadblock as Amit Jain, co-founder of CarDekho and its largest shareholder, does not want to exit and discussions are on as to who will lead the merged entity, the person said. Jain instead wants to raise fresh funds at a higher valuation from a big investor that can sign fat cheques.

With increasing competition, investors believe consolidation is the best way for the two auto classified portals to lead the category, the people quoted above said. In the last one year, players like Droom, Truebil, Gozoomo, CredR have attracted investor interest. Droom alone has raised nearly $63 in just two years. Horizontal classifieds players such as Quikr and Olx have also increased focus on the segment.

Valued at around $400 million, Jaipur-based CarDekho has hired investment bank Avendus Capital as a financial adviser to raise around $20-30 million, the people said.

Girnar Software-owned CarDekho is, however, struggling to raise a fresh round while CarTrade recently closed its Series G round of $55 million at a $380 million valuation from its existing investor Temasek and a US-based family house. CarDekho said the company is valued at $400 million.

CarDekho had last raised around $1 million from Dentsu Inc and mopped up around $15 million from Google Capital and existing investor Hillhouse Capital in March, documents filed with the Registrar of Companies show.

CarDekho said it has hired Avendus Capital for raising the next round but denied any merger talks. Vinay Sanghi, co-founder of CarTrade, confirmed that the firm is scouting for an acquisition and has earmarked more than $55 million for it, but declined to comment on talks with CarDekho. A Temasek spokesperson said in an emailed response, “We do not comment on market speculation.”

There are no talks of a merger as far as CarDekho is concerned and Sequoia is not involved, Shailesh Lakhani, managing director, Sequoia Capital India Advisors, said in reply to an emailed query. Warburg Pincus did not respond.

Girnar Software, which owns CarDekho, ZigWheels and Gaadi.com, saw its losses almost triple to Rs 144 crore in the year to March 2016, according to its filings. CarDekho reported a revenue of Rs 82.5 crore. CarTrade, along with CarWale, reported a loss of Rs 233 crore on a revenue of Rs 59 crore.

The used car market in India is estimated to grow to 70 lakh units by 2020, according to IndianBlueBook, a pricing guide for new and pre-owned vehicle valuation.