Used car unicorn Droom looks to refile IPO papers, turn profitable in 2025

Droom Founder and CEO Sandeep Aggarwal

Used car marketplace Droom is revving up its initial public offering (IPO) plans, with the company aiming to refile its draft papers in 2025. The Gurugram-based unicorn, which had initially filed its draft red herring prospectus (DRHP) with market regulator Sebi in 2021, paused its listing plans amid market volatility.

After restructuring the business, Droom has witnessed improvements in its financial health. The company is now set to turn earnings before interest, taxes, depreciation and amortisation (EBITDA) positive next calendar year, said Sandeep Aggarwal, founder and CEO, Droom.

Aggarwal added that Droom is on track to achieve operational profitability by next year.

"We have seen a reacceleration in growth this year. While there are three more months till the end of this fiscal, Droom has already grown roughly between 70-90 percent year-on-year. The company will be EBITDA positive in 2025, and if everything goes right, we will also refile our IPO papers next year," Aggarwal told Moneycontrol.

The company will also look to raise fresh funding in a pre-IPO round next year, before filing its DRHP.

Droom’s last major fundraise was in 2021, when it raised $200 million from investors like 57 Stars and Seven Train Ventures. To date, it has raised $341 million in funding across nine rounds, according to data from market intelligence platform Tracxn.

Improved financial performance

Droom’s listing plans come after the company has made significant improvements its financial metrics, albeit at the cost of growth. According to Aggarwal, investors today are more likely to back startups exhibiting positive unit economics and profitable growth – a direct consequence of the funding winter.

Droom reported a 54 percent decrease in losses to Rs 62 crore in FY23, down from Rs 137 crore in the previous year. In parallel, its revenue fell 32 percent to Rs 262 crore, down from Rs 390 crore during the same period.

While the company’s FY24 financials are not out yet, it would have witnessed a similar decrease in revenue after culling its mass market business by over 90 percent to improve unit economics.

“We did not think that we would be profitable in the value segment anytime soon. For that, we would need more time. We make more commission as a marketplace in mid- and premium- and luxury segments. Moreover, our customer acquisition costs are lesser each time we made a premium car sale,” explained Aggarwal.

After restructuring the business, Aggarwal claims that Droom crossed Rs 4,000 crore in annual gross merchandise value (GMV) and Rs 200 crore in annual revenue in June 2024 (Q1 FY25). It is now aiming to close FY25 with a GMV of more than Rs 5,000 crore and over Rs 250 crore in revenue.

“We feel that, in FY26 and going into FY27, the company can easily grow at the rate of 50 percent year-on-year,” he said.

Growth drivers

India’s used car sector is still nascent and growing. In FY23, a total of 51 lakh used cars were sold in India and the industry was worth $34 billion. From there, the sector is expected to grow to $73 billion and sell 1.09 crore used cars by FY28, according to the latest Indian Blue Book (IBB) report by 'car&bike' and 'Das WeltAuto by Volkswagen'.

Going forward, Droom is looking to capitalize on the rapid rise of e-commerce, amid an ongoing wave of premiumization, to drive growth.

“There is a wave of premiumization going on. In both the new and used car markets, vehicles priced above Rs 10 lakh are growing faster than those under Rs 10 lakh. And we currently are the largest (used car) player in India for mid-, premium and luxury segments,” Aggarwal emphasized.

The company, like its competitors, has also diversified into offering ancillary services like loans and insurance to bolster revenues. Droom currently makes three percent commissions on loans, and as much as 27 percent on insurance premiums as income, which Aggarwal says, is emerging as a key driver of profitability.

Roughly 15 months ago, the company had also launched its own cloud service Droom Cloud Service to provide businesses an enterprise software-as-a-service (SaaS) offering.

Rivals Cars24 and Spinny have been looking at alternative ways to grow revenue streams and add more services.

Cars24 now offers services like vehicle servicing, insurance payments, vehicle financing, chauffeur booking and FASTag distribution. Spinny, on the other hand, consolidated by merging its budget and luxury car offerings – Truebil and Spinny Max – last year.

Droom is experimenting with launching new automobile categories as well. For instance, the firm is now working with automobile original equipment manufacturers like Audi, Hero Electric, Hyundai, Mahindra, Tata, Mercedes-Benz, and Royal Enfield, among others, to sell new and used electric vehicles (EVs).

Since a bulk of the EV demand is business-to-business, Droom has shifted its business model from business-to-consumer (B2C) to focus on this category as well.

“We have an opportunity to be the largest multi-brand retailer for EVs in India. EV sales, much like smartphones and other electronics, are moving towards a dealer-less model. They will be sold online, so we see a big opportunity there,” Aggarwal said.

The company, through its marketplace model, has been able to sidestep the newly imposed GST burden of 18 percent on used cars, which was earlier 12 percent. Since the tax is applicable only on vehicles bought by businesses, Droom – who does not buy and sell cars – has remained largely unaffected.