Droom Technology Ltd., a car marketplace, has filed for an IPO for Rs. 3,000 crore with SEBI. This issue consists of a fresh issuance worth Rs. 2,000 crore and a Rs. 1,000 offer for sale. The promoters, Droom Pte Ltd. and Sandeep Aggarwal, own the entire company.
The company is considering a Rs. 400 crore private placement. ICICI Securities, Axis Capital, Edelweiss Financial Services Ltd., Nomura Financial Advisory and Securities Ltd., and HSBC Securities and Capital Markets Pvt. Ltd. are the book-running lead managers for this issue. The company has seen a growth in employees which went from 277 employees in 31 March,2021 to 286 employees as of 31 September, 2021. The company has 20,725 auto dealers from 1,151 cities across the country.
Objective of the issue:
- Rs.1,150 crore of the net proceeds is to be set aside to fund organic growth initiatives.
- Rs.400 crore of the net proceeds is to be set aside to fund inorganic growth initiatives.
About Company
Droom Technology is a technology and data science firm that assists in the buying and sale of automobiles by combining an asset-light vehicle e-commerce platform with a technology-driven system of services and products for the automobile sector. With a 65% market share, the firm operates the largest vehicle portal in the country. Droom provides six distinct products and services, including Droom Explore, which is used for automobile research. This is a vehicle price engine that has had over 45.07 crore search inquiries as of September 31, 2021. ECO is an inspection service. Droom History is a repository of vehicle history, Droom Credit is a finance platform centered on autos, and Droom Velocity is a last-mile delivery and fulfillment service.
Since operations began in 2014, the firm has been developed numerous times to keep up with market demands and remain relevant. From 12.85 million in FY19 to 14.20 million in FY21, app downloads climbed at a CAGR of 5.12%. The number of downloads as of September 31, 2021, is 14.46 million. Yes Bank, Tata Capital Financial Services Ltd, Bajaj Finance Ltd, and other banks and NBFCs have positive relationships with the organization.
Droom Technology IPO Financials :
| Financial year | Total Assets in Millions | Total Income in Millions | Profit After Tax in Millions |
|---|---|---|---|
| March FY 2021 | Rs. 1,148.38 | Rs. 1,355.23 | Rs. 688.83 |
| March FY 2020 | Rs. 1,364.78 | Rs. 1,813.68 | Rs. 896.03 |
| March FY 2019 | Rs. 1,290.29 | Rs. 1,461.11 | Rs. 1,053.70 |
Droom Technology Peer Comparison
| Company Name | Operating Revenue (in Rs. crores) | PAT Margin |
|---|---|---|
| Droom | 172.2 | 49.4% |
| Spinny | 11.4 | 432.2% |
| Cardekho | 706.3 | 43.4% |
| Cars24 | 2,998.1 | 9.3% |
| Car Trade Tech | 298.3 | 9.8% |
Know before investing
Strengths :
- Droom Technology is the country’s leading automobile e-commerce platform in terms of GMV and it is the only major player in the market that offers end-to-end offerings. As of 30 September, 2021 the company had a selection of 278,807 used vehicles listed across 11 categories.
- The company has a large technology team that is solely dedicated to the development of the platform. A total of 33.57% of the employees are engages in production and development.
- The company has a sound and stable financial profile and high operating leverage. The vehicle order in FY19, FY20 and FY21 were 88,981, 72,174 and 45,444 respectively.
- The founder, Sandeep Aggarwal, is recognized as among the 30 Influential Business Leaders 2017 by Insight success.
Risks :
- If ever the company is unable to provide a proper vehicle search then this will lead to a below average customer experience. This will lead to a decrease in the buyer seller interaction on the site and thus adversely affect the business.
- Failure to maintain the technology and various platforms of the company will lead to low quality of service and loss of business.
- If there is a cyber attack then all the user’s data will be revealed and the platform will no longer be secure and this will in turn harm the reputation of the company.
- A decrease in the number of auto dealers on the platform will have material effect on the operation of the business.
Droom Technology IPO FAQs :
Q1. What is the source of income for Droom?
Ans. Droom primarily makes money through commissions and subscriptions:
- For new vehicles, it is a flat booking charge or a 1% – 1.25% fee.
- In the case of used motorcycles, it is 2.5% – 3%.
- For used cars, the commission differs from 2% to 2.5%.
- Dealer subscriptions generate 15% of its revenue, ranging between Rs. 45,000 – Rs. 1,00,000.
Q2. Where are the subsidiaries of Droom?
Ans. Droom, a Singapore holding organisation, has its subsidiaries in the United States and India. The company’s headquarters is in Gurgaon, India.
Q3. Who are the major investors for Droom?
Ans. Some of the major investors of Droom are Integrated Asset Management, Joe Hirao, Toyota Tsusho Corporation, Digital Garage, Beenext Beenos and LightBox.
Q4. Has Droom acquired any company?
Ans. In 2019, Droom Technology acquired a company named Xeraphin Finvest Pvt. Ltd. to enhance its dealer credit marketplace and consumer base.
Q5. Who are the finance partners of Droom?
Ans. Droom has finance and credit partners, namely Lendbox, Cashkumar, Hero Fincorp, Faircent, Manappuram Finance, Tata Capital, Yes Bank and IDFC First Bank.
