Cartrade Tech Ltd

NSE:CARTRADE

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to CarTrade Tech Limited Q2 and H1 FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions]

Please note that this conference is being recorded. I now hand the conference over to Mr. Vinay Sanghi, Chairman and Managing Director for CarTrade Tech Limited. Thank you, and over to you, sir.

[Vinay Sanghi, executive]

Thank you. I want to welcome all of you to this earnings call for CarTrade Tech. It's been an extremely exciting quarter for us, where as we've earlier announced, acquired OLX's business in India. And obviously, we are very excited about the future potential of that business. Some of the things we talk through today and compare some of the numbers, they may not be all comparable just because there's been 50 days of operations in our financial statements. But we'll try and clarify multiples, reports all of this to you. So once again, thank you for joining.

I want to go straight on the presentation we have shared to Page #5. I just want to highlight, we've seen a 44% growth in revenue in the quarter and our profit after tax is 132%. We continue to be the #1 portal in India. We're also now one of the leading classified businesses in India, 70 million MAUs per month active users across OLX, and other platforms of ours, more than 100 million downloads. So really, I mean, all our platforms to strong brands. And the great part about all the 70 million MAUs, 90% is organic, which means we pay very marketing costs to bring these users on board. A lot of it is just brand and brand and relevant search.

We have 350 physical locations now after the OLX acquisition. So AutoMall, abSure and OLX stores make up 350 physical locations. 1.2 million vehicles at a of 100 million [indiscernible] to last quarter. Revenue jumped up, of course, to INR 148 crores in the quarter. And this is net revenue. This is not GMV or turnover just net revenue. EBITDA is about INR 32 crores for the last quarter, TAT about INR 13 crores. And we continue to be strong -- had a strong cash balance, almost INR 700 crores and of course, debt free.

If you go to the next slide, which is Slide 7, which talks about consolidated results as September '23. This is including OLX, so the growth for the first 6 months is 32% and quarter-on-quarter is 44% of course the numbers in there. EBITDA for the 6 monthly 30% quarters. slightly muted at 4% but it's numbers in there as well. PBD is up 78% for 6 months and 13% for the quarter. And again, that's a factor of some collective cost there. NPAT is up 132% versus 200% for the 6 months. So that's Slide #7.

If we go to the next slide, which is really about OLX and looking at the 3-month and 6-month performance. Revenue has been tough at about 9% to 10% in the 6 months or 3 months, and that's been on the back of AutoMall, the remarketing business having a flattish period as we've been talking about in the earlier call as well. So the net revenue is down 14%, 6 months, 9% quarter-on-quarter. Adjusted EBITDA is up 31%, 6 months and about 6% quarter-on-quarter.

And in that, there has been some cost related to our diligence of OLX as well attached for the -- in the quarter and definitely EBITDA slightly lower. PBT is up 26% and 88%. And of course, PAT is up 164% and 28%. So all in all, CarWale at the consumer group has seen some level of growth, Shiram AutoMall has been the growth has been flattish. And the OLX numbers have added in the quarter showing the largest growth for the business.

If you go to the next slide, which is stand-alone results for the quarter and for 6 months, which includes most of the consumer business or CarWale business, 6-month growth is about 25%. The net revenue from operations for 3 months is 22%. EBITDA is up 55% for 6 months, 9% for the quarter. Again, you've got some cost -- onetime cost built in related to diligence on the acquisition. The adjusted EBITDA, we take out other income has gone up 26% and 51% for the 6-month period. If you look at -- PAT is up 36% and 146% for 6 months. If you look at the PAT of 36% on a stand-alone basis, I think a big factor here, the growth was even higher, is because last year, there was a INR 6 crore dividend internal dividend from Shiram AutoMall to and that is the comparison is showing 36% will be much higher. If we normalize it for the dividend, it comes to almost 1,000% growth in PAT. So that's the stand-alone results.

The next slide is the remarketing of the consolidated results of Shiram AutoMall. And that's where you see 2% growth in the quarter, minus 3% for 6 months. EBITDA is also a 3% growth for the quarter and plus 6% for 6 months. Overall, flattish PAT and PBT is slightly down, but flattish PAT, down 2% for the quarter. This is really the concern for us still where we feel now we see the quarter revenue on quarter EBITDA seems to have bottomed out from the last 3, 4 quarters. Even here, when we talked about the repossession business coming down, in fact, the repossession business has now come down to sort of -- come down to a share of 48% from 57% last year, so 48% of the business is repossessed versus 57% last year, so from 57% of our total volume, so the repossessed only is 48%. And our retail business has around 38% and 31%. So our retail supply motor model goes up, the repossession business is coming down.

If you go to the slide on OLX and I want to spend some time here. As we have discussed on the call earlier, when we acquired Sobeco, which owned OLX classified business and OLX transaction business, we bought 2 businesses within the same company. The classified business in the last quarter has shown a revenue of INR 23 crores, but this revenue is only for 50 days and a profit -- or a profit of PAT of INR 10.6 crores so it's a high-margin business for us. And as I said, this is only for a 50-day period. On the other hand, the transaction business on a revenue of INR 12 crores. I've shown a loss of INR 13 crores for the same period. So the classified business show a profit of INR 10 crores. The transaction business show a loss of INR 13 crores.

As you may have read in our public announcement and statements a few weeks ago, and as we talked on the call earlier, we have now, in the last 2 weeks, shut down the -- and scaled down the transaction business. And obviously, therefore, in an attempt to do 2 things, one is focus on the classified business. We remain extremely optimistic about, which is having being in all those 34 million, 35 million unique users per month and has a strong, strong presence of market for used cars to other products and goods. And therefore, the classified business is something we want to continue to invest behind and back.

And we have scaled down or brought down to 0 the C2B transaction business in an attempt to obviously bring down the loss-making part of the acquisition. This has already been initiated. And we believe in this quarter, it will completely be done. In order to bring it down or close it, there may be an approximate cost of INR 25 crores onetime cost to shut down the business. And I think what would the normalized business or the normalized financial of the business will really come from the Jan to March quarter after this onetime cost has been incurred, where the classified business and unit economics and the growth from there will continue to work. So I think this is something which we've indicated in the past and now complete -- in the process of completion.

And therefore, this acquisition, which are 2 parts of it, the classified business and the transaction business will now only have a classified business and which has an automotive side to it and an automotive side. And we're extremely excited about both those businesses, which we continue to now -- which is what we continue to invest behind and grow. Obviously, as you can see in these numbers, this is the profitable side of the business. And the intent was to bring down the losses from the loss-making side of the business. And as I said, by December end, this action should be complete.

Also, what we had indicated in the last call was that we have a onetime debt cost of approximately INR 10 crores per month. We had indicated that it might take us 6 months to do the entire technology transfer to the part of our purchase contract to get in that tech transfer over 3 or 6 months. We feel that today, that is likely to happen 3 months before schedule. And rather than incurring a 6-month cost of INR 10 crores per month, which is again onetime, it will be only for 3 months. And therefore, from January, our tech costs will also dramatically come down. So we feel good about the fact that the last of the transaction business, where we incurred some onetime cost this quarter, the October to December quarter, would come down in the Jan to March quarter, as well as the onetime tech costs which were being incurred from October to December, we will probably not spill over to January and only the 3 months.

So these are 2 major points of announcement on the acquisition. As we continue to look at the acquisition work on it with the teams there, we' seem even more excited about the acquisition of what we were when we assessed it. So we continue to -- as I said, we continue to investment in the classified business and continue to grow it. I want to add here that within this -- within the Auto acquisition, the classified is a huge used car part. As you all know, CarWale is the other used car classified player in the country. CarWale, of course, as you also know, is 84% new and 16% used, and OLX's used car side is very, very significant to the entire used car industry. So we feel really insight about the whole OLX classified business.

So this is -- on the next slide, you have Google Trends and as it shows, CarWale continues to be well ahead of its peers. We've also given Google trends versus its other competitors quicker, and you can clearly see where OLX stands, [ 68:1 ], clearly, having a leadership in the whole classified space, automotive and nonautomotive. So this is what I wanted to highlight. I'm happy to go into Q&A or question-and-answer session to elaborate or clarify any doubts on the financials or the acquisition of OLX in India. And so out to some questions for you.

[Operator]

[Operator Instructions] The first question is from the line of Sachin Dixit from JM Financial.

[Sachin Dixit, analyst]

Congrats on closing the acquisition so quickly and also decided to rates. Quickly, I wanted to understand in the P&L that you have shared for OLX, where is the product and tech expense part right now?

[Vinay Sanghi, executive]

In the last quarter, we didn't have this global product tech cost until September and is very minimal. And therefore, there was very minimal cost. As I said in the last call, it will come on 1st October. And we actually originally anticipated INR 10 crores a month from October 1 to April 1. But because of the progress we made, we believe it will only be for 3 months. So it is not really there in the P&L we shared because it didn't exist at that time. It's not there in the last quarter.

[Sachin Dixit, analyst]

Understood.

[Vinay Sanghi, executive]

It's very minimal, it's very minimal and it's not significant.

[Sachin Dixit, analyst]

We see it in this quarter and then it should die down?

[Vinay Sanghi, executive]

It will be a onetime INR 30 crores this quarter. And so this quarter with INR 30 crores of tech cost and some shutting down costs is going to be up to extraordinary items. But yes, from April 1, the acquisition will have -- will be absent of across the onetime shutting costs as well as the tech costs will come down dramatically somewhere. And I wanted to add here, although we clarified this earlier, that when we acquired the company for a consideration of INR 523 crores, some of these things were known and we almost considerations made at the time of purchase as well.

[Sachin Dixit, analyst]

I think you meant from January 1, there will be onetime cost?

[Vinay Sanghi, executive]

Yes. We originally thought April 1 but now it's probably for January. Yes, sir.

[Sachin Dixit, analyst]

And the INR 25 onetime cost that you just mentioned, does this include the tech costs or it's on top of it?

[Vinay Sanghi, executive]

No, no, it's not. The tech cost has nothing to do with this. The tech transfer costs and tech migration is on the classified business and the transaction business. This onetime shutting is just shutting the transaction business. I mean, various contract terminations, et cetera, et cetera.

[Sachin Dixit, analyst]

And any inventory losses or anything that might come up because you might be liquidating some of the vehicles?

[Vinay Sanghi, executive]

It's all in the INR 25 crores we've certainly. It's all in

[Sachin Dixit, analyst]

Great. Yes, sounds good. Just one more question on the piece of the marketing business, right? Obviously, you mentioned like it looks like it's bottoming out. You might have seen some data for the last 1.5 months as well. Where do you see that tracking? Secondly, when you say retail for the marketing business, does this only have individuals or this is just anyone who is not an OEM or a bank?

[Vinay Sanghi, executive]

Yes, sure. So the retailer business, to be honest, is last quarter has been flattish over the previous year, right, a little bit. So what's clear is that it's bottoming out but it's not clear, it's growing. That is the difference. And whether it takes 1 month or 3 months or 6 months, it's hard for us to predict at this stage. Just that it seems like the asset quality of people lending in the automotive sector is good, it just seems all right.

Now is that a reflection of the industry at large is the section or a country at this point. It's hard to tell but that is the reality. So we actually focus a lot on going on the retail side, which is the second part of your question. And that supply comes from individuals like you and me. It comes from small operators but it's basically most people. [indiscernible] vehicle being brought in at the time, not like an institutional time. It may give us 2,000, 1,000 or 500 [indiscernible] a month, not that.

[Sachin Dixit, analyst]

Just one final question on the OLX piece. Again, is there any color that you can provide on the historicals? I know you guys have provided for this quarter for which you consolidated but we don't have any context there.

[Vinay Sanghi, executive]

Sorry, you mean historical on what I can, but historical what?

[Sachin Dixit, analyst]

What part of OLX business, like how did this business do in the last year? Last -- I mean whatever data you can provide?

[Vinay Sanghi, executive]

So we've actually the numbers we've given you in the first 2 months, and we've also given some rough run rate projection of the business in July, right, when we acquired the company. Classified business roughly at that time, we had given you close about INR 170 crores to INR 180 crores revenue a year. With a stand-alone without tech built-in cost or a profit of INR 100 crores, INR 110 crores. And that's just been the historical way it's been.

What we want to do, obviously, and then there was the transaction business, which had a net revenue of about INR 100 crores, a little over that, and a loss of INR 100 crores, right? And then there were tech costs below this. Now what we've tried to do is say, listen, it's really hard to fix the unit economics of the transaction business. And therefore, we're willing to that INR 100 crore revenue and INR 100 crore loss goes with it, right? So in a way, it leaves us in the business with the profit. And to be honest, that's one of the reasons we acquired the company because we're really excited about the classified business.

And within that classified business, a very large part of it used cars, right, which is what we -- obviously, the synergy for us as a business, which affects all our other businesses as well. Now what is over and above that, is there going to be some tech and corporate overhead, which will come into the classified business, which has been charged in the transaction business. And a lot of this will get normalized on the January quarter because in this quarter, we had 2 onetime costs, right? The tech transfer costs, which is completely to do with transfer of -- during the tech platform due to the acquisition and the onetime shutdown costs of the transaction business. Does this answer your question?

[Sachin Dixit, analyst]

So I just really wanted color on previous year, right? So just for how the business and historically was for demand.

[Vinay Sanghi, executive]

So some of it is hard because we actually at the case business transfer contract.

[Operator]

[Operator Instructions] The next question is from the line of Vijit Jain from Citi.

[Vijit Jain, analyst]

Congratulations. It looks like a decent growth across core businesses as well as congratulations on the OLX deal again. My question is, first, I'm just curious, was this always a plan when you were acquiring the company to take a hard look at the used car business and share it down? And was that -- I'm just wondering, was that something that came from process that you had to consider or buy both the businesses together? That's my first question, and then I had a couple of other questions.

[Vinay Sanghi, executive]

No, I think when we bought the company, we look at the classified business which we're really excited about. And it had a used car website, which is hugely synergistic. And then they had this consumer business, transaction business, of course, loss-making, but they were pretty good at it in terms of customer experience in many other parameters and metrics.

For us, when we bought it, at first -- we obviously had 2, 3 choices. One is to buy and fix it economics, going to scale it down and bring down the losses and to the state, right? I think we did think of all these 3 things over the last 3, 4, 5 months. Eventually came to the conclusion that this is going to be hard to fix the way it's run now. Not to say here we're not running a business. It's just that we don't want to run it the way of all the processes which are being followed in the past. We still think there's a huge C2B part in India, the consumers want to sell parts. And I don't know whether you know but OLX is probably -- is not only -- it is the largest platform with car sellers use to sell their cars even today on the cap side.

Millions of people list their cars every year to sell on OLX. It's the #1 platform for car sellers. What we actually -- what we could not fix is a C2B auction model, right, which is auctioning these cars out. We continue to be in the C2B business and even C2C business on the classified side. As time goes on, we will look at how we can continue the C2B business in a different form. It's just that we didn't think that this model -- the unit comes will be fixed at all. And actually, this is not just us, it came from the team at all.

[Vijit Jain, analyst]

Got it. Understood. And then my next question is, it's a slightly different variation of, I guess, what Sachin was trying to ask. But just trying to get a sense of what the underlying growth in this classified business is for you. And like you gave these metrics around users, unique visitors and engagement and those kinds of things. What kind of metrics should we expect to see on the OLX side of the business and the growth trends? And I also have a question that I would like to ask on the margin side but maybe if you can answer this first.

[Vinay Sanghi, executive]

Yes, perfect. So for us, when you look at the business, and OLX has had the classified business. I don't talk about transaction business growth because it will not be relevant anymore. Even though they had rapid growth, it may not be relevant anymore because it is an exist now. When you look at the classified business, it had reasonable growth in revenues, high growth in profitability over the last 3 quarters.

As I said, these numbers is BPA so we don't have the of it, but since the transfer was sold in a business transfer contract. This is one part of it. The second part I want to highlight here is we remain extremely excited about the used car classified side, which we believe we can grow -- we can keep growing over a long period of time, OLX being the leading player in the country. OLX has multiple other categories like real estate, electronics, mobile, 2-wheelers, which also was extremely dominant pace. There's actually if you want to sell something in India.

Outside OLX very almost small the platform in India. So we've seen the huge monetization opportunity. And that's got nothing to do in the past. It's just what we believe about OLX, right, a revenue of INR 180 crores, INR 190 crores of car revenue. We believe there's a rapid growth capability out here itself. But this is one part of it. The second part of it is, I think, when you look at CarWale, both of the companies, they tend to grow over the last few years about 20%, 25% net revenue and profitability may be slightly higher. We believe that now we've bought something which is almost 50% of our size, right, automatically.

So in a way, if you look at the revenue of the business, it goes up by 40% automatically on day 1. Our question now comes around, there's going to be some focus around the unit economics of the business and the margin structure in the business as well. So not only are we saying that OLX will help us grow revenues, which it already has and will continue to do so by growing itself as well. Same will go independent as well away, but we also believe that the combined unit economics should get better and better every day.

So it's like almost going OLX, growing the combined entity growing just because of the acquisition and OLX growth and CarWale some growth and then getting the unit economics and margins to improve in all these businesses. And OLX nature of the business is very similar to CarWale, where increase in revenue does not need to be an increase in cost. The metrics to measure would be things like traffic, of course, related revenue, EBITDA profits, all the same metrics we always declare for CarWale, very similar businesses. One is just for horizontal and one is a vertical business. That's it.

[Vijit Jain, analyst]

Got it. And then my last question is, sir, in the classified financials that you guys have shared, I can see the adjusted EBITDA margin is 47%, and you are reporting INR 11 crores of profit for the 50-day period, right? So if I'm just going to be a bit approximate maybe INR 8 crores, INR 9 crores of EBITDA on a monthly basis versus the PBT cost that you say you will incur of about INR 10 crores per month in the next 3 months. So I'm just trying to point...

[Vinay Sanghi, executive]

This is actually -- and I'll explain this right. This is only because the tech is being operated in a global OLX platform, not in our own environment the transfers on December 31. And therefore, it's a onetime cost, actually, suppose for 6 months which we're committed to incur as part of the purchase transaction. it doesn't mean we'll incur that cost to model. That's my.

[Vijit Jain, analyst]

Yes. So my question, when I was -- what should we think of as more run rate once January comes, is the margins in the 20% handle you think, so INR 10 crores of EBITDA, minus say, INR 5 crores of PBT in your own hands, and so you get like 20% handle on margins. Is that how we should think about time...

[Vinay Sanghi, executive]

You honest, it may take some time to transport answer. We do anticipate that there are 2 things will happen. One, the PBT costs will come down dramatically. I would think probably between 20% and 30%, it's probably 40% to 50% of what they are, number one. It's hard for the time with that transfer not fully happen. Another thing which could happen is that there is some corporate overhead going to come here because they're all sitting in the transaction business. We want to continue investing.

See, if you were not looking to invest in OLX classified at all, then what -- as many would be this. But we want to make sure that a vibrant product tech team, management team, adding to the team to make sure this run rate revenue grows a rapid rate. We don't want to keep it on. We believe in this business. And so there is some investment in overhead, which we will do in this business. But that will be -- the overhead will automatically start paying for itself very quickly. It might take 2, 3 months, but very quickly start thing for herself. Not that we anticipate losses at all in the next quarter, but the profit might be a little more muted when you think of it.

[Vijit Jain, analyst]

Got it. My last...

[Vinay Sanghi, executive]

Very short term, yes.

[Vijit Jain, analyst]

Got it. And the very last question, in, you can -- from an overall company perspective, give some color on product road map, product development plans in the next 1 year post this acquisition, not just for OLX but also for CarWale and everything. And related to that, I suppose, the auto cycle seems to be recovering. Are you seeing signs of that in your own business?

[Vinay Sanghi, executive]

I think the auto cycle is recovered, I won't say recovering. But to be honest, I think our focus and be unlocking at lease as CarWale, CarWale is 84% new, 16% used. OLX is 100% used in everything. And of that 100% used, all the 45% to 50% is used cars. For us, our #1 focus here between CarWale and OLX, we have a very high share of user classified business. Our #1 objective on product development and capability then is really to start growing the used classified business on both sides, CarWale as well as OLX, and product related to that.

So on the side, we've always said we've been kind of closer to the transaction more on moving from a place within the car and select a car to really buying a car. And that development is underway and continuously making improvements on that on every side. I think on OLX too, I think we're going to go and invest in product capability, not only use aside, but we is very, very strong on 2-wheelers, electronics and mobile phones, real estate, et cetera, and start looking those categories to have disproportionate growth in them as well.

So right now, as I said, we're setting up new product teams in OLX. There are about 40 people in the product team right now. They're still setting it up. And once the chances done, we should have a good product team out there. This starts building differentiated cutting edge technology for OLX for many, many years to come.

[Operator]

[Operator Instructions] The next question is from Siddhartha Bera from Nomura.

[Siddhartha Bera, analyst]

Sir, I just wanted to check on this improvement in the unique visitors we have seen in the quarter. It's been quite a good improvement compared to the last quarter. So any thoughts what is driving this? And given this backdrop, do we expect that the revenue growth trend which we are seeing in the stand-alone business of close to 22% for quite some time now, that can have some upside here also as well in the medium term?

[Vinay Sanghi, executive]

Yes, the growth rate seems to be this for the last few quarters, last year was much higher. But generally, this is the growth of the new car CarWale, which is 84% new cars. I think what I said earlier is we feel that actually the car business has been pretty strong in the first 6 months of the year across the industry. And supply seems to be good, in fact, period 1.5 years ago, where supply was lower than demand. Today, demand -- the supply is good and demand is as good actually. So it's a very good place to be in the new car industry for everyone including us.

There are no shortages as such, but at the same time, supply -- demand is pretty good, and supply is pretty high. I think this trend is probably going to continue for a while. Where we see and where we are focused on, it might take a few months is really the used car side of CarWale and used car side of OLX where we see a lot of positive growth and what we're working on. I come back and they use the industry has been very buoyant as well. We really see that CarWale numbers on the car side as well as OLX by going up.

[Siddhartha Bera, analyst]

Got it. And second is on the synergy side. So I understand on the cost side but on the revenue side also, do you see there is -- there will be some synergies which we can sort of derive post this acquisition or target of the system? And what are the areas and how much can that go up to?

[Vinay Sanghi, executive]

The main synergy is used car business, right, because that's where the overlap exists. And again, as I come back, we basically see whether you can add CarWale and OLX and give a much stronger product out to all the dealers in India who use products. And that's where we see the #1 synergy between the companies. But we see a significant, significant upside in the next year or 2 years in this business.

[Operator]

The next question is from the line of Pahel Shah from Billion Securities.

[Unknown Analyst]

Sir, I have 2 questions. One on the remarketing business. So FY '23 was a year of growth for the business on the back of multiple factors like Mahindra incidents, higher ASPs used cars. So I just wanted to understand that H1 FY '23 has been relatively flat. So how does the remainder of FY '24 and '25 look like for this segment of the business?

[Vinay Sanghi, executive]

Yes. Actually, the 6 months has been tough, and I think it's a lot has been due to the fall in the repossessed business. I think there's also been growth on the other side of the business because order fall here has been made up by the retail business in other businesses. We are hoping that things turn around probably in this quarter, the next quarter because the repossessed numbers seem to have bottomed out.

And as I said in the previous calls, that even though the repossessed business is down, we made lower refers elsewhere. And when the reprocessed business does come back, whether it takes 3 months or 6 months, we'll be a much stronger company, and I think we keep saying that. So we -- I don't want to give any growth guidance, but we do believe that in the next 3 to 6 months, China automotive be a much better place than it is today.

[Unknown Analyst]

Okay. Sir, my next question would be like has approximately 35-plus in monthly unit, which is similar to the average is because on -- so what is the number of visitors we aim to get platform from under one of will definitely be an overlap between these visitors to...

[Vinay Sanghi, executive]

So there's no intent to bring them on OLX, and OLX app will continue to function as they are. CarWale and its products will continue to function as they are. Many people come to Carwale, as I say, 84% people come to care for new cars, 100% people come to OLX for used cars. So the users of the consumers or people who come for different reasons, like someone like me and you might go to CarWale, buy a new car or -- and someone like you and we will go to OLX arose or power or even buy a refrigerator or a seller refrigerator.

So it's just the different platforms and use that different people for different purposes. But as I said, the engagement metrics are different, the methodology of acquiring is different, 70% people coming on OLX through an app with the download on their phone. And then they use the multiple things. They use it from selling a car to a 2-wheeler to buying so far to different reasons. Today, someone's moving house and want to sell 3 items in the house, whether it's a computer or a sofa or refrigerators then going to OLX. So OLX is a very different place in the heart of consumers. And CarWale a different place. If you want to buy a INR 10 lakh new car, going to go to car vale for that. So those are going to be function dependent and both have to grow independently.

[Operator]

The next question is from the line of Pankaj Bobade, an individual investor.

[Unknown Attendee]

Okay. Well, congrats for a good set of results. And season greetings to you and your team. Just wanted to understand, we are closing down the C2B business, which had gross revenues of INR 194-odd crores and net revenues of INR 30-odd crores. And we have paid around INR 523 crore, INR 530 crores for the whole business. So did we not overvalue the business at the time of purchasing it?

[Vinay Sanghi, executive]

No, we don't feel that because in our estimation of valuation, we have factored many of these things into account of the transaction business and the business. So we actually feel that when we valued it, we arrive at fair value, keeping some of the considerations in mind.

[Unknown Attendee]

Okay. Now when we are closing it down.

[Vinay Sanghi, executive]

[indiscernible] Hello?

[Operator]

Unfortunately, I think he is having some issue with this line. [Operator Instructions] The next question is from the line of Meta from AB Capital.

[Unknown Analyst]

My first question would be on [indiscernible] outlook. In the last call, you mentioned the number of outlets being 120-plus. What is the number of outlets now and how do you see business ramping up?

[Vinay Sanghi, executive]

I think this is a similar number. I did stress that we also have now over 100 OLX similar kind of outlets. So we actually doubled our stores already. In the next month or 2 months, we're working on a strategy around the 110, 120, which are the CarWale and 110 [indiscernible] and figuring out whether what we should do with the combined 230, 240 stores. So one other thing that done has given us a lot of decent distribution as well through these stores.

[Unknown Analyst]

Okay, okay. Owning to the acquisition of OLX, a significant portion of our cash has been deferred but their income will significantly be lower. So by when do we expect the returns from this transaction to cover that?

[Vinay Sanghi, executive]

No, that's a very good question. In all centers as we've lost some amount of other income, which is obviously because we've deployed a cash to the transaction. We do believe that in the -- it will take some time, but definitely in the short to medium term, OLX will more than compensate for the loss of interest income. But we do feel conscious about that.

[Unknown Analyst]

Also, what are the company's plans for the remaining INR 600-plus crores on the book? Any other acquisitions in store?

[Vinay Sanghi, executive]

At this point, honestly, we are just looking at the consolidation of OLX, the tech transfer, the growth of the classified business, the integration with our current businesses and growing our current businesses. If something that come up in the future, we look a little bit at this point, the whole focus is on getting this right.

[Operator]

[Operator Instructions] The next question is from the line of Sachin Dixit from JM Financials.

[Sachin Dixit, analyst]

I will add a couple of follow-up questions. So the first one being when the plan, at least that the communicated plan was that we will have OLX transactions has been classified. Then also, you were saying the product in teens will fall by 40% to 60%. Now the transitions have gone, I was expecting maybe a sharper drop in that expense. But even now, you are saying 40% to 50% decline only.

[Vinay Sanghi, executive]

No it's possible, Sachin, you're saying is correct and it's possible. It's hard to assess at this point, but it is possible.

[Sachin Dixit, analyst]

All right. And secondly, on the 110-odd OLX tools, I believe those are part of OLX the transactions business. So when you're shutting it down...

[Vinay Sanghi, executive]

That is part of the classified business.

[Sachin Dixit, analyst]

That's part of classifieds?

[Vinay Sanghi, executive]

That's right.

[Sachin Dixit, analyst]

Okay, okay. Sure. On the OLX classifieds, now honestly, there is a lot of competition in the non-auto portion of OLX, right? I mean, mobile is small maybe, but I believe last time you guys mentioned 15% of the revenue actually comes from else. Looking at the number of real estate portals that exist in India, like how much sustainable or how much noted is the other revenue on OLX, other than others?

[Vinay Sanghi, executive]

So of course, auto, there's a very high level of market share and relevance to be used or dealer today. We talk to used car either. We'll tell you a large part of the sale is a less dependent. The other categories, in fact, the main categories I'll talk through, one is mobile phones and electronics. I don't think there's any other verticalized or horizontal player, which is able to cater to millions of people who come on to the stator to sell the mobile phone or electronic device, right, they're a consumer or a dealer. So a very large amount of traffic comes from seller mobile phone and electronics.

The third category we've got is Again, very, very high percentage of users so their use their tool on OLX. And again, consumer in dealers as well. So -- and people want to buy these products and other electronics, mobile phones or 2-wheelers need to come to OLX to get them is the supply source available. So yes, when it's used cars, mobiles, electronics and 2-wheelers, which you see this model as a situation.

When you come to something like real estate, which is another reasonably strong category for them, there are 2 types of real estate advertisers. One is the user like you and me have got a plant to sell or a property to sell or -- which is like a refill, which is almost market a new development. OLX is only on the resale side today, which is existing homes being sold. A lot of the other real estate sites are on new developments, which is new developers, advertising. It's all of the CarWale on the new car side, the new other websites or the new development side, where it's 100% on the home side, which is my house and your house, single homes side. And on that side, they've got a reasonable market share and strength. That's where the can. So segmentation is different, but I'll just try to explain all these categories and talk you through what OLX is.

[Sachin Dixit, analyst]

And my understanding was even for second resale and rental also, we have a decent number of hotels. So any is moving on the monetization piece for OLX classified. My guess is most of it is coming from either a used car dealer or a shop owner, people like those. How much would the breakdown according to you will be between individual IPL versus someone who's running a business out of it?

[Vinay Sanghi, executive]

Clearly on the car side, the breakdown is evident for us because we'll be computed. When you come to mobile phones and segmented supply, it's hard to tell who's the user and who's a dealer, right? It's very hard because the the platform and pay and list. But as I said, on the car side, a significant part, I would say, 75%, 80% or some dealers. And the other category is very hard for us to comment at this time, how much is users in. But on either side, we've seen from the platform, the traction is fantastic, and there's a lot of opportunity to improve monetization and performance for the users, I mean from the users and for the users. I think it's a massive, massive opportunity across categories, not just cars.

[Sachin Dixit, analyst]

Sir, those are the questions.

[Vinay Sanghi, executive]

I think you've given some numbers out earlier in our, but bigger, correct me if I'm wrong, 35 million listings a year?

[Sachin Dixit, analyst]

Yes. I have those numbers from the monetization number...

[Vinay Sanghi, executive]

You look at the number, right, and you say about 35 million. That's a very large number...

[Operator]

The next question is from the line of Sanjay Sood, who's an individual investor.

[Unknown Attendee]

Congrats. I just wanted to understand, what is the ROI period for this acquisition?

[Vinay Sanghi, executive]

What is the ROI? Sorry, what is the ROI?

[Unknown Attendee]

Return on investment.

[Vinay Sanghi, executive]

At this point, immediately at this point, it's hard to quantify our investment. But when I look at the ROI investment over a long period of time, we believe -- obviously, we have our own hurdle rate in the company of what return it should give the parent and then, of course, the shareholders. But we believe there is significant value creation for CarTrade Tech shareholders.

OLX is, if you look at the multiples of the valuation in terms of revenue terms or even any other terms, it's a reasonably cost acquisition. And we do believe that the amount of synergy guides and its own and on its own fleet and on strength is going to have tremendous value to us over the next 3 to 5 years.

[Unknown Attendee]

Okay. And one request from my side. If you can provide used car sale data on a monthly basis. Like what basically are providing these data since you have grown big now and becoming bigger, hopefully. So it will be making for all of us to understand, we are moving in this production.

[Vinay Sanghi, executive]

Since they're a classified platform, what we currently provide an auction platform, we provide sales data on the used vehicle side. But here on the classified side, we try and provide some other proxies so that a good idea of the use stock business metrics, if that's okay.

[Unknown Attendee]

Okay. And then I just wanted to understand, you have closed down the C2B business to do business, what exactly it used to do because I have not understood the...

[Vinay Sanghi, executive]

Sure. What it did was if you list your car on OLX and millions of people a year list their car on OLX, a small percentage of them wanted to auction the vehicle to dealers. So what they had done was built an electronic exchange, where what they would do is, first, they come to a house and inspect the vehicle. And then they would auction your vehicle to a large number of dealers in India, would bid for it and then they will pick up that vehicle from you and give it to the dealer and make that margin in between. I think that is the model.

We just found that the whole costs are operating it. First of all, the very few percentage of OLX customers wanted it, but more than that, we found on the cost of inspecting it from you, collecting it, a dealer and the margin made in between the unit economics was very broken. That's what we found.

[Unknown Attendee]

So like it is not like Shiram AutoMall business?

[Vinay Sanghi, executive]

It is actually the auction business, Shiram AutoMall, but Shiram AutoMall is actually got very high scale in what it does and it's got its own location. So it doesn't go through the house to inspect but people bring in vehicles to the locations for auction. So slightly different the business is similar. The execution of Shiram AutoMall is far more efficient.

[Operator]

[Operator Instructions] The next question is from the line of Vijit Jain from Citi.

[Vijit Jain, analyst]

Have 2 questions. So one, just looking at the stand-alone revenues and P&L this quarter, right. So your adjusted EBITDA, excluding other income is about INR 6 crores. And if I remember right, there's INR 1 crore of provision for the due diligence stuff done here, right? So should we think of the adjusted EBITDA income sustainable number here at INR 7.3 crore roughly? That's a pretty -- that's again a pretty decent jump Y-o-Y, Q-o-Q. And I can see your costs, if I look at it in that line have been fairly controlled. So just your thoughts on whether that's the.

[Vinay Sanghi, executive]

Higher? I just want to check. I think it's INR 1.5 crores, I'm not 100% sure.

[Aneesha Menon, executive]

INR 1.5 crores. For Q1, yes. [indiscernible]

[Vinay Sanghi, executive]

Yes, but that was probably the correct answer, that probably correct then.

[Aneesha Menon, executive]

Yes.

[Vijit Jain, analyst]

Okay. So the due diligence cost was in 1Q and so it's not a part of 2Q expenses. Is that what you're saying?

[Vinay Sanghi, executive]

No, it's both. It's in both, yes.

[Vijit Jain, analyst]

Okay. Okay, got it. And the second question I had was I just wanted to understand what do those 100 OLX outlets do for the classifieds business? Are they similar to the abSure in terms of model and how it works?

[Vinay Sanghi, executive]

Yes, it is quite similar. I think the way a little more refined where abSure's created so that you could buy a vehicle online on CarWale and the back-end services of the product warranty and the money-back and all that could be under the actual store. So it created to enable a whole digital environment to your purchase. I think what OLX deal does is it had a very premium dealer who is certified auto dealer. And even though they offer the money back to offer the warrant being after money back and the online experience.

They made it into a curated marketplace within OLX the classified business and keep growing it out. So these are almost differentiating where they almost adopted these dealers. Again, it's an asset-light market, franchise dealer on dealer-operated, dealer working capital, these are fixed assets, et cetera, et cetera. So very similar. It's just that our vision was slightly different where we wanted our stores to be really looking at the next phase of our growth a few years from now where you -- if you and I want to buy a part online, then you are the stores which you'll be able to get it in that experience completed in a particular way. They did this with a view of giving a high-quality car to the user. I think that's what's been take.

[Vijit Jain, analyst]

Got it. Understood. And the second question just on the OLX part. So I would imagine, and when I look at the app chart, for example, I can see that OLX usually is among the top 10, top 15 apps on both Android and iOS. So is it safe to assume that most of the traffic for OLX comes from the app versus your...

[Vinay Sanghi, executive]

The carve it out actually more than 70% more than 70%, yes.

[Vijit Jain, analyst]

So 70% for OLX is apps while 30% is app for...

[Vinay Sanghi, executive]

Yes, CarWale would be like about 25%, 30%. I mean, something like -- it's probably a little bit of reverse. I think that's also partly because OLX some multiple purposes. CarWale is like a high engagement, onetime, maybe banker is like one time. So it's a little different, the use will be different.

[Vijit Jain, analyst]

Yes. And so with related that's obviously in addition to getting a much bigger scale in the used car business, you are also getting a much bigger play in mobile ad space with this. My question is, is there anything from the ad tech products that OLX has built that you think you could use in CarWale on those kinds of things?

[Vinay Sanghi, executive]

Yes, a lot of costs in very many early days, but lots of cross-learning on programmatic ad selling to AI is so much learning between the 2 teams. But as I said, it's only -- I think day 19 [indiscernible] So it's just very early days and a lot of time went in tech transfer and the shutting of the C2B and all of that. So now is time for us in the next probably 30 to 60 days to be putting the processes in place of people and producing learn from each other or many of these issues.

[Vijit Jain, analyst]

Got it. And then because I ask also that also because I'm just wondering, you mentioned that those product development costs will go down by 40% to 50%, possibly more. In general for India, Internet when people -- when companies build all these different kinds of products, ad solutions and whatnot, et cetera. It's usually pretty expensive to build those, right? So from a continuing to support the product and building new products. How confident are you that you would be able to...

[Vinay Sanghi, executive]

Confident. No, no, very far from the cost that...

[Vijit Jain, analyst]

Cost as the product development?

[Vinay Sanghi, executive]

Yes, definitely on the tech cost because customers currently, these costs are being incurred by them globally and then being charged to us because it's in their environment. It's not completely coded to our cost into in India for this. So I think the first part is the entire team is now part of our teams, which is part of the not their team handling is number one.

Number two, all the third parties, infrastructure, et cetera, et cetera, created by them is what this platform used is slowly moving to our environment of our infrastructure, et cetera, et cetera. So it's completely different in. In fact, it's hard to contract fully, but definitely significantly going to be lower than what it was.

[Vijit Jain, analyst]

Got it, understood. Those are my questions, and congratulations again in a...

[Operator]

The next question is from the line of Pankaj individual investor.

[Unknown Attendee]

Just wanted to understand when we are closing down the CP transaction business of So what are we going to do with it? I mean, I understand that the losses which are which were draining out of them, that will be closed down, on the other. But then it would have some fixed assets, which you would we be able to

[Vinay Sanghi, executive]

There was no fixed assets in this in or minimal fixed assets because a lot of the places we captive lease properties. And the business was an asset-light business. So them auctioning cars on behalf of seller dealers. I think the only real asset will be the tech platform itself, which, of course, we have with us. And we'll see a lot of the use we can make in the future.

And of course, another asset would be the data and some of the IP related to it, which is also we won in the future. But the intent is to -- so I clarified that earlier on the call, the intent is to shut the current way we operate do business. As I said, a large, large number of people list the car for sale on OLX, which continues. So it's not like we're exiting the set business as such. We're exceeding the C2B transaction business.

So still someone like you can sell it to a consumer or to a leader, which is happening. Millions of people are doing that every year. a small percentage want us to auction is in a transaction model, which is what overlaid, which is what is shutting down. It's not the C2B shutting now. It is the C2B transaction business shutting down.

[Unknown Attendee]

Right. I understand that. What I meant to say that we have paid -- the seller at that time was valuing the whole business and the valuation was done on the old revenues, right? So for INR 503 crores and a big chunk of that was coming from -- sorry, INR 520 crores, which we valued the business and a big chunk of revenues was coming from this business. So if we are writing the that...

[Vinay Sanghi, executive]

No, we want because when we did the valuation for it, we have factored some of the scaling down, et cetera, et cetera.

[Unknown Attendee]

Yes, I'm done with it.

[Operator]

Okay, no problem. All right. Gentlemen and ladies, due to time constraint, that was the last question for the day. As there are no further questions, I would like to hand the conference over to the management for closing comments. Over to you, sir.

[Vinay Sanghi, executive]

Thank you, and thank you for all of you for being here today. I just want to tell you how excited about the last quarter and the acquisition of OLX once again. Happy Diwali to all of you and enjoy your weekend and the festivities ahead. Thank you, everybody. Thank you.

[Operator]

On behalf of CarTrade Tech Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.