Founded in 2014, Droom is a data science and technology-driven online marketplace that sells and buys used as well as new automobiles. It has been the greatest auto website in India, with over 65% of the market share (automobile transactions) online. Besides, it is the third biggest e-commerce entity in the country with respect to GMV.
This platform is agnostic towards geography, condition, price, seller, and category. Droom has 3 pricing formats, i.e., auction, best price and fixed price and 4 marketplace formats, namely B2B, C2B, C2C and B2C. Interestingly, it offers various product categories from a bicycle to an aircraft and services such as auto loans, insurance, RSA and warranty. The company has filed the DRHP with SEBI and now awaits the market regulator’s approval to float its IPO.
Droom Technology Limited IPO Objectives
- The company will utilise Rs. 400 crores of the proceeds (net) to finance inorganic growth initiatives.
- It will use Rs. 1,150 crores of the proceeds (net) to finance organic growth initiatives.
- The balance amount will be set aside for general corporate purposes.
Why should you invest in Droom Technology Limited IPO?
Investing in this offering can be a favourable choice because of the following reasons:
- The automobile sector of India, which comprises used and new vehicles and related services, is likely to grow at a compound annual growth rate of 16.4% within fiscal 2021-2026. Favourable government initiatives, increased disposable earnings and changing customer preferences for mobility will help drive the growth of the auto industry.
- Droom has integrated more than 20,725 auto dealers across 1,151 cities in India. The sellers and auto dealers on this platform have facilitated more than 3.70 million automobile listings. The firm will continue to create services, tools and technology for auto dealers, helping them to adapt to new age e-commerce opportunities.
- Since it commenced its business, Droom has expanded the platform by continuously including new services and products. It has been successful in building a well-informed design and engineering team for developing evolving solutions for the buyers, auto dealers and sellers.
- Droom Technology has plans to expand internationally as well as domestically. It aims to assess and pursue acquisition opportunities and strategic investment throughout the auto value chain for complementing and supplementing its existing strategies and services.
- With an expansion in the scale of its operations, there has been an improvement in unit economics. The firm’s scale has enabled it to minimise fixed infrastructure expenses (per-unit basis). Hence, its main focus is to grow in a sustainable and profitable manner.
On 11 November 2021, Droom filed its DRHP with SEBI to raise Rs. 3,000 crores through a public issue. The IPO consists of an offer for sale worth Rs. 1,000 crores and a fresh issuance of shares amounting to Rs. 2,000 crores.
The promoters, namely Droom Pte Ltd and Sandeep Aggarwal, hold 100% of the company's stake. They may chalk out a private placement of shares worth Rs. 400 crores.
If the firm undertakes a pre-IPO placement, then there will be a reduction in the size of the fresh issue. The lead coordinators in the issue are Nomura Financial Advisory and Securities (India) Private Limited, HSBC Securities and Capital Markets (India) Private Limited, Edelweiss Financial Services, Axis Capital and ICICI Securities.
IPO Financials
| Financial year | Total Assets | Total Assets in Millions | Total Income in Millions |
|---|---|---|---|
| March FY 2021 | 129 Cr. | Rs. 1,148.38 | Rs. 1,355.23 |
| March FY 2020 | 136 Cr. | Rs. 1,364.78 | Rs. 1,813.68 |
| March FY 2019 | 115 Cr. | Rs. 1,290.29 | Rs. 1,461.11 |
Know before investing
Strengths
4On 30 September 2021, Droom recorded a wide selection of used vehicles (278,807) listed throughout 11 categories.
It involves a sizeable technology team to enhance the online platform. Nearly 33.57% of the workforce is engaged in development and production.
The firm has high operating leverage and a stable and sound financial profile. The automobile order during FY 21, FY 20 and FY 19 were 45,444, 72,174 and 88,981, respectively.
Insight success has recognised Sandeep Aggarwal, founder of Droom Technology, as one of the 30 most eminent businessmen of 2017.
Risks
4The dependency of the shareholders is somewhat high. So, any inconsistency in this regard can impact the growth of the company.
In the past, this entity has incurred losses and negative cash flows.
Highly dependent on the involvement of consumers in the online platform.
This entity has litigation proceedings that can impact the brand image.
Peer Comparison
| Company Name | Operating Revenue (in Rs. crores) | PAT Margin | Market Cap | Dividend Yield |
|---|---|---|---|---|
| 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% | - | - |
