Big deal: CarTrade seeks path to CarDekho merger
Posted on 31 July, 2017 by Thierry Heles, editor
Temasek, an existing investor in CarTrade, is looking to put nearly $100m towards the deal, which is currently facing resistance from CarDekho’s largest shareholder Amit Jain.
It appears as though the ongoing saga around a merger between Snapdeal, an e-commerce platform backed by Singapore state-owned investment firm Temasek, and its rival Flipkart were not enough to keep Temasek busy – another one of its portfolio companies, India-based online automotive classifieds service CarTrade, faces a similar story, BloomberQuint reported yesterday.
CarTrade is exploring a merger with its domestic competitor CarDekho, backed by diversified conglomerate Alphabet’s growth equity arm CapitalG, to create India’s largest online car classifieds platform.
Temasek may put as much as $100m towards the deal, with the majority of that cash allocated to a secondary transaction. The sovereign wealth fund is driving the discussion alongside fellow shareholder Warburg Pincus, while on the other side of the table we find Sequoia Capital – though Shailesh Lakhani, managing director at Sequoia Capital India Advisors, has denied any discussions were taking place.
Incorporated in 2010, CarTrade operates an online marketplace for new and used vehicles, as well as offering financing through partnerships with banks and other providers. It has also created a platform aimed at dealerships to manage business operations.
CarDekho, founded in 2008, is a subsidiary of e-commerce firm Girnar Software. The company operates a similar business to CarTrade – its marketplace allows car owners to sell their vehicles to others. It also offers price comparisons, reviews and contact details of dealerships, as well as financing and insurance products.
CarTrade and CarDekho have become increasingly stiff competitors, leading to mounting losses. However, the talks are facing a significant obstacle in Amit Jain, co-founder of CarDekho and the company’s largest shareholder, who does not want to exit – and the two sides have not yet figured out who will be at the helm of a merged business.
Jain is said to be seeking a funding round instead, at a higher valuation than a merger would fetch – CarDekho is currently valued at approximately $300m and needs between $20m and $30m.
But money is not easy to come by for CarDekho anymore – the company last raised cash in February 2016, securing $15m in a transaction led by CapitalG. Reports in December 2015 suggested CarDekho had actually sought a funding round of $30m. The startup has disclosed $80m in equity to date.
CarTrade on the other hand is still well funded – and has reached a slightly higher valuation at $380m – with a funding round this past February adding $55m to its coffers. Temasek and an unnamed US-based family office led that round, to bring CarTrade’s total equity to $230m.
A merger would also help the two companies deal with other rivals, such as Droom, which raised $20m in a series C round earlier this month from internet company Digital Garage, e-commerce company Beenos, Integrated Asset Management, which led the round, Lightbox and Beenext. Droom’s reserves have reached $65m – coming dangerously close to CarDekho’s despite having only been launched in 2014.
With Jain holding out, a merger between CarTrade and CarDekho is not necessarily imminent, but as the Snapdeal-Flipkart discussions show, such matters are hardly ever resolved quickly.
As Temasek waves its $100m cheque at the two companies, the prospect of forming a stronger alliance to dominate a rapidly growing market may yet trump one co-founder’s wish not to exit – after all, Jain could find himself the chief executive of an enlarged company.
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