IPO Alert: Droom Technology files papers with market regulator for a public listing

The automotive industry in India contributes 7.1% to the GDP, which is expected to increase to about 12% by 2026. The country’s automobile market is seen growing at a compound annual rate of 17.3% and reach ₹36,72,500 crores by 2026.

India was the 5th largest car market in the world by sales volume in 2020 and is expected to grow at a CAGR of 17% and reach ₹43, 27,00 crores by 2026. The used vehicle’s market is expected to grow to ₹70,83,00 crores, at a rate of 15.7%.

Droom Technology has filed preliminary papers with capital markets regulator Securities and Exchange Board of India to raise ₹3,000 crores through an initial share sale. The offering comprises fresh issuance of shares worth ₹2,000 crores and an offer for sale of shares worth ₹1,000 crores by promoter Droom Pte Ltd, as per the draft red herring prospectus.

The company may consider a private placement of equity shares aggregating ₹400 crores. If the pre-IPO placement is undertaken, the fresh issue size will be reduced.

The company plans to use ₹11,50 crores from the net proceeds towards funding organic growth initiatives. Further, the company will utilize ₹400 crores towards strategic business objectives and the remaining funds will be used for general corporate purposes.

Technology Marketplace

Droom Technology is a technology and data science company that facilitates automobile buying and selling through a combination of asset-light automobile e-commerce platforms and with a technology-driven vertically integrated proprietary ecosystem of products and services for the automobile industry.

The Gurugram-based company has a complete online transactional model and offers one of the largest selection of automobiles amongst the major online players in India, with over 1.15 million vehicles listed that include used/new cars, two-wheelers, and other vehicles, as of September 30, 2021.

The company’s eCommerce platform allows users to buy and sell new and used vehicles and encompasses every element of automobile buying.

Droom technology competes with other players like CarDekho, Cars24, Spinny, CarTrade, CarWale, FOMO and Carlypso.

Key Numbers

Droom Technology had a consolidated revenue of ₹135.5 crores in the year ended March 2021, compared to ₹181.3 crores in the previous year. The company suffered a net loss of ₹68.8 crores compared to a loss of ₹89.6 crores a year ago.

The demand for used cars tends to fluctuate between different quarters and individual months, due to unfavourable economic conditions, malfunctions of websites/apps and special offers from competitors. Also, the government may implement policies for old vehicles that would reduce the demand.