FinSight Ventures: investing in CarDekho
The largest ecosystem of AutoTech services in South-East Asia
(initially published on finsightvc.com on December 17, 2021)
India is one of the fastest growing markets today, which is going through a digital transformation. Startups are bringing new technologies to modernize business processes and significantly increase product quality and user experience. Over the last years there were numerous examples of new unicorns which radically reshaped and consolidated the markets. For example, Byju’s (another our portfolio company), became an obsolete leader of the education market in India segment and GupShup, another Finsight VC’s portfolio company, today is a clear leader in the communication market, serving most of the Indian unicorns.
One of the industries which is still highly fragmented and technologically underdeveloped is the Indian auto market. According to India Times, auto penetration in India is below 3%, which is 2.5x lower than in other South-East Asian countries, 7x lower than in China and 27x lower than in the US. Used car financing penetration is 4.4x lower than in developed countries. Used car market does not have a clear leader and 82% of the market is formed by small sellers, who offer a highly limited choice of 10–15 cars. Moreover, Indian consumers are very skeptical about the quality of used cars as there are no guarantees from sellers and even sellers do not have infrastructure to properly check and upgrade cars that they are selling.
Today there is one company which has already become a market leader in the new auto space and now aims to consolidate the used car segment — CarDekho. CarDekho is an ecosystem of autotech services, which include new and used cars platforms, fintech services, insuretech products and it is a part of Girnar Software, which also operates biketech business and edtech. Deeply integrated verticals within one large ecosystem allows CarDekho to achieve best unit economics in the market and easily scale and upsell new products to its clients.
CarDekho originally is the most popular leadgen platform for car dealers in India. Majority of consumers visit the CarDekho platform to browse for a new car, which allows the company to develop an AI/ML model to identify consumers’ needs, preferences and probability of a purchase (differentiating real buyers from those who came just to take a look), based on 10y+ clients’ database. In 2021 CarDekho started to scale in the used car market and has already launched a marketplace. Company buys used cars from individuals, runs diagnostics, repairs, upgrades and then sells it directly to the customers or to the dealers.
On the buy side, CarDekho offers individuals a unique car selling experience. Company developed its proprietary model, which allows Cardekho to perform augmented inspection and value auto by taking photos, based on AI/ML algorithms and computer vision. Proprietary model reduces the diagnostics process from days to minutes. When car valuation is done, the seller receives a fixed price offering. CarDekho eliminates any barganings regarding the price, making the selling process much easier and comfortable for clients.
For consumers CarDekho offers a choice of more than 3,000 used autos, which is the widest in the market. All cars passed CarDekho’s diagnostics and are being sold with a guarantee and the buyer has a right to return a car within 14 days due to any reason. Also, CarDekho offers one week test drive experience for their client, so there are no doubts about the car at the moment of purchase. Finally, CarDekho already opened the largest used cars showroom in India to offer their clients an exclusive in-person experience, which is standard for new car purchases. In the future CarDekho plans to open such showrooms in each key region.
Today, according to TechCrunch, CarDekho operates in 100+ markets in India and works with nearly all auto dealers, contributing 30% of their sales annually. Its partners-network include 3,500 new car dealers and 4,000 used car dealers and traders. CarDekho’s ARR exceeded $100M in September 2021.
One of the key strengths of CarDekho are fintech and insurtech business lines. CarDekho is the #1 platform in India for auto loans origination (Cardekho doesn’t carry any credit risk, instead the company acts as a leadgen for banks) and a leading agent in the auto insurance market. The main advantage of CarDekho is their ability to efficiently value underlying cars. Also, in contrast to other market players, CarDekho develops a wide partners-network to cover all Indian regions. Another key point why CarDekho consolidates fintech and insuretech markets in auto space is their AI/ML algorithms which allows to price cars remotely, so the full process takes significantly shorter time than for other market agents and increases turnover, which significantly reduces banks’ risk related to unsecured lending. Fintech business is already profitable for CarDekho, while insurance business crossed break-even point, according to TechCrunch.
We at FinSight Ventures believe that CarDekho, which combines major business verticals within one ecosystem, is a perfect solution for the South-East Asia auto market, which is currently technologically underserved and fragmented. In our opinion, CarDekho is a well-established brand in the auto segment which is already an absolute leader in some major verticals and has everything to become a one-stop solution for all consumer needs during auto-ownership lifecycle from choosing the car and financing a purchase to selling it and buying the other one. We are happy to announce that FinSight VC has become an investor in Girnar Software, holding company of CarDekho.
___
This document is for informational purposes only and is not an advertisement for securities and/or financial derivatives and/or investment contracts and/or investment or financial services (hereinafter referred to as the “Review”). This Review has been created by FinSight Ventures (hereinafter “FinSight”) and is intended for distribution exclusively to qualified investors who are or are recognized as such in accordance with the laws applicable to the personal law of the Recipient of this Review. This Review is not intended for persons residing in the United States, who are US tax residents, possess citizenship or other document confirming the right of such persons to temporarily or permanently reside in the United States, dependent territories of the United States or other territories subject to the jurisdiction of the United States (hereinafter — “US persons”). FinSight invites the Recipient of this Review to independently verify that he or she has the right to familiarize himself with information about the investment opportunities and products mentioned in this Review. Thus, FinSight cannot be held liable in any way if the Recipient of the Review violates the prohibitions applicable to him in any jurisdiction.
This Review has not been compiled expressly for a specific individual or legal entity and does not represent an individual investment recommendation and/or FinSight’s intention to provide investment advisory services. This Review does not constitute an offer to sell or buy any securities, derivatives or investment contracts in all jurisdictions and jurisdictions where such an offer would be illegal.
This Review is based solely on publicly available information and FinSight makes no representations of the circumstances or guarantees that the Review is complete or accurate. FinSight is not responsible for any losses (including, but limited to, actual damage and loss of profits) arising from the information contained in this Review. Such information is presented in the form in which it existed at the date of the Review and may be supplemented and changed without notice. This Review does not contain all the information necessary to fully evaluate any transaction or investment, and you cannot rely solely on the content of this Review when taking actions aimed at creating, changing or terminating civil rights and obligations. Any investment decision must be made only after due diligence and, if applicable, after receiving investment proposals, prospectuses, and their careful analysis. This Review may contain statements of its author about the future, which represent opinions, expectations, assumptions, estimates or strategies for the future, which may not be realized. Such statements can be expressed through the use of words such as “suppose,” “expect,” “believe,” “evaluate,” “may,” “plan,” “should,” and other similar expressions. Forward-looking statements reflect the author’s positions and assumptions regarding future events as of the date of this Review and are subject to the realization or non-realization of risks and general uncertainty. Actual and future results and trends may differ materially from those described by similar statements by the author, depending on various factors, including uncontrollable or unpredictable ones. Given these uncertainties, the Recipient of this Review should not rely on such forward-looking statements. Recipients of this Review should not rely on the contents of this Review for legal, tax or investment advice or consultation, and they are encouraged to consult with qualified professionals when taking actions to create, modify or terminate civil rights and obligations.
Investors in securities, derivatives and investment contracts should be prepared to accept the risks of partial or complete loss of the amount invested, in particular market risk (the likelihood of asset value depreciation due to unfavorable market conditions), credit risk of the issuer of the securities and the issuer of the underlying securities or derivative financial instruments and investment contracts, risk of deferred payment, etc. The value and income of such investments may be influenced by changes in interest rates or foreign exchange rates, the value of securities, derivatives and investment contracts, stock market indices, the operating and financial conditions of the companies, or other factors, whether or not the controlled by companies. The investor should understand that making investments in securities, financial derivatives and investment contracts may entail significant risks due to the constant uncertainty associated with the use of forecasts of various factors that may affect the income, financial flow and the overall valuation of the company. FinSight and/or the state does not guarantee the profitability of investments, investment activities and/or securities, financial derivatives and investment contracts. Any investment in securities, derivatives and investment contracts should be made only after evaluating the investor’s entire investment portfolio (issues of portfolio diversification by asset class and industry), its goals, investment timing and liquidity needs. Moreover, the past results of investment activity / activities should not be taken as an estimate or a guarantee of future results of investment activities / activities; and no assurances of circumstances or guarantees are provided with respect to the future results of investment activities / activities. As part of such investment activities, there may be temporary restrictions on the exercise of options or other rights to securities, financial derivatives and investment contracts.
Investing in foreign and securities markets, financial derivatives and investment contracts carries additional risks associated with changes in exchange rates, limited information, political instability, economic risk and the inability to sell the investment. Investing in non-public companies can also carry these risks. Non-public companies may not provide information or provide false information. Investing in non-public companies may carry an additional risk of lack of liquidity in relation to such an investment, since the company may never enter the public securities market or the sale of an investment in the securities of such a company may be restricted by the company itself, other shareholders or third parties. Please note that the listed risks are not exhaustive and the investor must make his own risk assessment, not relying on the information on risks in this Review as containing all possible risks.
The objects of intellectual property contained in this Review belong to their respective owners. Third parties who may have been involved from time to time to prepare this Review and who may have provided information for this Review do not make any representations of the circumstances or guarantees as to the accuracy, completeness or relevance of the data they provide, and are not responsible for any losses. arising in connection with this information. This Review, or any part of it, may not be reprinted, sold, or transmitted without the written consent of FinSight. This Review is provided solely for its use by the Recipient for his/her own purposes. The Recipient acknowledges that all research and all analysis contained in this Review is owned by FinSight. The recipient must restrict the use of any publications and materials received from FinSight. The recipient confirms that he/she has no rights to transfer, distribute, reprint or resell the information contained in this Review.
