6 September, 2017 By Supraja Srinivasan, ET Bureau
MUMBAI: Chinese Internet giant and owner of Wechat, Tencent is in talks to invest in Girnar Software, which owns auto classified portal CarDekho.com. The fund raise, if it goes through, will see Tencent lead the Series C round pegged at $30-40 million, according to four sources aware of the development.
The talks are at an early stage with discussions on valuation yet to take shape for the Sequoia and Google Capital backed online auto marketplace.
“CarDekho is also talking to other Chinese investors and some smaller American venture funds to invest in the round along with Tencent. However, a term-sheet for the round is a few weeks away,” said one of the persons aware of the talks.
CarDekho, which competes with players like CarTrade and Quikr's auto vertical, last raised about $15 million ( Rs 96 crore) from Google Capital and Hillhouse Capital in March 2016 in a round that valued the company at about $366 million (Rs 2346 crore).
Over the last year, Tencent has emerged as one of the most active Chinese investors picking significant stakes in a host of Indian Internet companies across sectors including Flipkart, Byju’s, Hike Messenger and Practo. Tencent is also in the process of investing $400 million in ride-hailing aggregator Ola, ET had reported in July.
Tencent did not respond to an email query sent by ET until the time of going to print. “CarDekho is in early stage discussions with global investors for its Series C round of funding. It is too early to comment on further details,” said a spokesperson for CarDekho in response to ET’s email query.
encent’s interest in CarDekho is a strategic part of its global play in the auto financing space. Tencent along with China’s search engine giant Baidu, has invested over $1.6 billion in online automobile financing platform Yixin Capital in the past 6 months.
For CarDekho, a significant part of its growth in FY17 has come from the one year old used car financing business - one that is at the core of its growth strategy over the next few years. CarDekho saw consolidated revenues surge 38% to Rs 113 crore in FY17, up from Rs 82 crore last year with used car revenues alone surging 72%.
“FY17 saw our used-car strategy of generating revenues through service offerings across finance, insurance and warranty coming together, while remaining competitive on classifieds,’ CEO Amit Jain had told ET in July. Of a 5,000-strong dealer network, CarDekho’s used car business alone has 3,000 dealers.
To be sure, revenues from the used car business form about 20% of the firm’s revenue pie. Within that, financing and insurance generate about 2/3rd of the used car business’ cash flow. ET had reported in April that Girnar Soft had received a license from the regulator to launch a separate insurance vertical ‘Girnar Insurance Brokers’.
CarDekho currently clocks an annual loan rate of $35 million for its used car financing business even as it sells over 2,500 monthly policies on the insurance side of the business.
“CarDekho’s push towards financing and insurance comes on the back of their vision to get into the financing business possibly as an NBFC in 2-3 years. The investment from Tencent ties in with their vision to build scale in this business, given Tencent’s investments in the space globally,” said one of the persons cited above. The company had earlier said that it will invest about 30% of any future capital raised, in the insurance and financing business as it targets to reach profitability by December 2017.