As CarTrade's Lock-In Period Ends, Will Investors Do A Zomato In Terms Of Distress Selling?

With CarTrade Tech's lock-in period for its anchor investors ending on August 20, its stock fell as much as 5.9 per cent on the BSE to hit an intraday low of Rs 595.90 on Monday. Car-Trade’s stock fate was similar to Zomato’s and Paytm’s when both the companies’ stock plummeted by 11 per cent and 13 per cent, when their lock-in periods ended on July 23 and December, 2021, respectively.  

However, whether investors will resort to distress selling as they did in the case of Zomato in July will have to be seen.  

Shares of new-age tech companies such as CarTrade, Paytm, Zomato and Nykaa have massively come under selling pressure on account of expensive valuations at which they sold their shares at the time of getting listed. Subsequent liquidity tightening amid rising interest rates globally has only added to selling pressure for these shares, say analysts. 

While the stock price of CarTrade, Zomato and Paytm have dived to new lows since getting listed on the bourses, the fall in CarTrade’s stock price on Monday wasn’t as steep as in the case of Zomato due to comparatively low market capitalization. In comparison to their IPO prices, CarTrade’s stock price has fallen as much as 71 per cent to Rs 462 from its IPO price of Rs 1,618 per share; Zomato has seen a drop of 47 per cent from its IPO price of Rs 76 to hit a low of Rs 40.55 and Paytm has plunged 76 per cent to hit a low of Rs 511. 

The multi-channel auto platform provider’s market capitalisation is Rs 2,941 crore with a free float of Rs 1,265 crore (free float means excluding shares held by promoters), whereas, Zomato has a market capitalisation of Rs 49,224 crore with a free float of Rs 8,860 crore and Paytm has a market capitalisation of Rs 50,748 crore with a free float of Rs 7,104 crore. 

During the three-day sale that ended on August 11 last year, CarTrade Tech sold shares in the price band of Rs 1,585-1,618 per share. It raised Rs 2,998 crore from the IPO, which was entirely an offer for sale by its existing shareholders. The company had reported a net profit of Rs 101 crore for FY2021 on a revenue of Rs 281 crore and a net profit of Rs 31.29 crore on sales of Rs 318 crore in FY2020. 

The company has various brands such as CarWale, CarTrade, Shriram Automall, BikeWale, CarTradeExchange, Adroit Auto, and AutoBiz under its wings. 

“We are clearly seeing a pattern that after the end of the lock-in period, investors are exiting the company at whatever price possible. But we do not know at what price they bought the shares when anchor investors invested in the company,” says Vijay Chopra of Enoch Ventures.