When it comes to the domain of pre-owned automobiles, CarDekho emerges as a notable player. What sets it apart? In addition to facilitating the purchase of used cars, CarDekho’s website offers a treasure of automotive content. One burning question on everyone’s mind- Is CarDekho profitable?
This query has drawn considerable attention. In the fiscal year 2022, CarDekho exhibited commendable growth. However, it encountered challenges amid a less-than-favorable market environment. Despite its impressive valuation at Rs. 9,919 crore ($1.2 billion), concerns have arisen regarding CarDekho’s revenue and profitability, as it grappled with substantial losses.
What led to this downturn? In the following sections, we will delve into CarDekho’s year-on-year business performance to uncover the underlying reasons.
CarDekho YOY Revenue Breakdown
First and foremost, let’s examine the positive aspects of the company. In FY22, CarDekho reported a revenue of Rs. 1,597 crores, a noteworthy increase compared to the previous fiscal year, FY21, when it earned Rs. 884 crores. Now, let’s delve into a comparison of CarDekho’s revenue over the last three fiscal years.
|Sale of used cars||Rs.799 crore||Rs.489 crore||Rs.292 crore|
|Advertising and digital marketing solutions||Rs.505 crore||Rs.252 crore||Rs.227 crore|
|Commission of dealer sales||Rs.217 crore||RS.97.5 crore||Rs.142 crore|
|Insurance Brokerage||Rs.48 crore||Rs.30 crore||Rs.33 crore|
|Other Operating Revenue||Rs.28 crore||Rs.15.5 crore||Rs.11 crore|
|Total Revenue Earned||Rs.1,597 crore||Rs.884 crore||Rs.706 crore|
Is CarDekho profitable? While it may appear to be profitable, in reality, that is not the case. Notably, CarDekho’s revenue witnessed growth in the current fiscal year, primarily driven by its platform services, particularly the sale of used cars. Another significant contributor to CarDekho’s revenue is its advertising and digital marketing solutions, making for a compelling narrative.
However, there is a significant downside to this picture, and that revolves around expenses. We will discuss it in the subsequent section.
CarDekho YOY Expenses Breakdown
On the expenditure front, the foremost cost for the company was the acquisition of used vehicle stock, constituting approximately 37.6% of the total expenses. Additionally, expenditures related to employee benefits increased to 31.8%, totaling Rs. 573 crores. The story is similar to the last three fiscal years.
Let’s now examine the overall year-on-year expenses that have resulted in substantial losses for CarDekho.
|Cost of materials consumed||Rs.816.8 crore||Rs.481.5 crore||Rs.289 crore|
|Employee Benefit Expenses||Rs.573 crore||Rs.434.7 crore||Rs.339 crore|
|Advertising & Promotional Expenses||Rs.408 crore||Rs.177.6 crore||Rs.234 crore|
|Outsourcing and Sub-Contracting Charges||Rs.156.8 crore||Rs.48 crore||Rs.75 crore|
|Server Hosting Charges||Rs.24.4 crore||Rs.16 crore||RS.31 crore|
|Other Expenses||Rs.156.8 crore||Rs.119 crore||Rs.141 crore|
|Total Expenses||Rs.2,170 crore||Rs.1,277 crore||Rs.1,081 crore|
Is CarDekho profitable? After looking at the above table you might have got a certain idea about the financials. The excessive expenditure sheds light on why CarDekho has consistently incurred significant losses. And that too despite its substantial revenue over the past three years. However, it’s important to note that the company views these expenses as strategic investments with the potential to yield significant future revenue.
CarDekho Business Model: A Quick Overview
Before proceeding further, let’s have a quick overview of the CarDekho business model. CarDekho is an Indian online platform that operates as a comprehensive automotive marketplace. Their business model revolves around connecting car buyers and sellers while generating revenue through various channels.
CarDekho earns through advertising from automakers and dealerships, lead generation for car dealers, and offering value-added services like insurance and financing. They also provide content, reviews, and comparisons to assist consumers in making informed decisions.
CarDekho’s business strategy relies on leveraging its digital platform to streamline the car-buying process and enhance user engagement. Also, it monetizes various aspects of the automotive industry. Thus, it creates a holistic ecosystem for automotive enthusiasts and industry players.
Overall Financials: Is CarDekho Profitable?
In FY22, CarDekho’s market valuation was Rs. 9,919 crore ($1.2 billion). The financials of CarDekho (last three fiscal years) are summarized in the following table-
|Revenue Earned||Rs.1,597 crore||Rs.884 crore||Rs.706 crore|
|Expenses||Rs.2,170 crore||Rs.1,277 crore||Rs.1,081 crore|
|Profit/Loss||Loss of Rs.535 crore||Loss of 343 crore||Loss of Rs.326 crore|
Let’s return to our question- Is CarDekho profitable? Well, the answer is- “No.” CarDekho has not been profitable for the last three fiscal years.
Despite successfully generating a substantial income through a diverse range of revenue streams, the company faced a significant challenge. Mainly in managing its finances due to a considerable outflow of cash in various operational and overhead expenses. This financial dilemma emerged as a result of the organization’s expenditures. The expenses were consistently surpassing the total revenue it was able to generate.
As a consequence of this ongoing financial disparity, the company has found itself grappling with a substantial and persistent deficit, leading to a continuous cycle of significant financial losses. This situation has far-reaching implications for the company’s financial health. Such as reduced profitability, constrained resources for investment and growth, and an enduring struggle to regain a more balanced financial footing.
What lies ahead for CarDekho?
CarDekho exhibited considerable effort and determination throughout the fiscal year of 2022, 2021, and 2020. However, this drive for growth is not unique to CarDekho alone. The company has embarked on an ambitious plan to expand its business presence into the South and East Asian markets.
The primary goal driving this expansion strategy is to solidify its position as a leading entity within the Indian automobile ecosystem. Currently, CarDekho has already commenced its operations in foreign nations such as Malaysia, Indonesia, and the Philippines as part of this global expansion initiative. The ambitious nature of this expansion endeavor necessitated substantial financial investment in various aspects of the business.
The last three fiscal years did not witness substantial profits for the company, as these investments translated into increased expenses. Despite the apparent financial challenge posed by this expansion, CarDekho’s leadership remains optimistic about the organization’s future financial prospects. Their optimism is rooted in the belief that these expenditures represent valuable investments poised to yield promising returns down the road. In essence, CarDekho views these expenses as strategic steps towards securing a strong foothold in new markets and achieving long-term growth and success.