CarTrade IPO listing day strategy: Stock may surge 20% even as grey market premium falls; buy, sell, hold?

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August 19, 2021 3:04 PM

CarTrade Tech IPO is all set to make its stock market debut on Friday, 20 August 2021, after the issue got 20.29 times subscription.

Cartrade Tech IPO, Cartrade gmp, Cartrade grey market premiumAmid negative sentiments in primary markets due to under-performance of recently listed IPOs, CarTrade Tech listing is also likely to get impacted.

CarTrade Tech IPO is all set to make its stock market debut on Friday, 20 August 2021, after the issue got 20.29 times subscription. In the primary market, CarTrade Tech shares fell further. The grey market premium has now fallen to Rs 120 from Rs 180, earlier this week, over the IPO price of Rs 1,618. CarTrade Tech shares were seen trading at Rs 1,738, a 7.4 per cent premium in the grey market, over the issue price, according to the people who deal in shares of unlisted companies.

CarTrade Tech is backed by marquee investors — Warburg Pincus, Temasek, JP Morgan, and March Capital. Amid negative sentiments in primary markets due to under-performance of recently listed IPOs, CarTrade Tech listing is also likely to get impacted, said an analyst. “CarTrade Tech may list somewhere around Rs 1,725-1,800. Despite, issue looking expensively priced, we may witness fancy after listing too as it has a first-mover advantage. However, in my personal opinion, it’s better to track further performance for a long-term view,” Abhay Doshi, Founder, UnlistedArena.com, dealing in Pre-IPO & Unlisted Shares, told Financial Express Online.

The CarTrade platform allows customers to buy and sell used cars as well as new cars. The firm is a multi-channel auto platform with coverage and presence across vehicle types and value-added services through its brands—CarWale, CarTrade, Shriram Automall, BikeWale, CarTradeExchange, Adroit Auto, and AutoBiz. Analysts say that when the IPO opened on 9 August 2021, the grey market premium was at Rs 400 or 24.7 per cent, over the issue price. Since then, it has been volatile and consistently falling and now the grey market premium is around Rs 170. “In my opinion, overall IPO fever is declining amidst the weakness in broader market indices. This has spoiled the taste of IPOs especially in August month,” Harsh Patidar, Auto Analyst at CapitalVia Global Research, told Financial Express Online.

Harsh Patidar also added that CarTrade’s IPO was oversubscribed, which is quite encouraging. “I expect it to give a decent listing gain of 15-20 per cent. Investors who do not worry about short-term volatility can continue to hold this stock for a long run as the company’s fundamentals are strong and it might give impressive returns in the next few years,” he added.

The automotive industry in India is highly competitive. The company’s key competitors include brands such as Cars24 (Cars24 Services Pvt Ltd), CarDekho and BikeDekho (Girnar Software Pvt Ltd), Droom (Droom Technology Pvt Ltd), and Mahindra First Choice Wheels Ltd. Analysts at Hem Securities expect 5-7% gain on the listing of CarTrade Tech. “Investors should book partial profit in case of while keep remaining holding for long term as the company being a leading marketplace for automotive sales with a synergistic ecosystem has proprietary end-to-end technology platforms with a focus on data science to provide solutions,” Astha Jain, Senior Research Analyst, Hem Securities. Also, the company is the only profitable automotive digital platform among peers with asset-light models and decent EBITDA margins, she said.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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