Droom, an online used car marketplace, is preparing to file draft papers for an initial public offering (IPO) worth INR 1,000 crore (~ USD 115 million) by June 2025. Droom IPO will consist of a fresh issue and an offer for sale, with the fresh issue accounting for more than half of the total amount.
Droom IPO – Valuation and Listing Timeline
Droom is aiming for a valuation between USD 1.2 billion and USD 1.5 billion (~INR 12,987 crore). The company has engaged two middle-market banks and is in discussions with an additional investment banker to oversee the Droom IPO process. If the timeline holds, Droom expects to be listed by November 2025.
This is the company’s second attempt at going public. In 2021, it filed a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) to raise INR 3,000 crore but withdrew due to unfavourable market conditions. Improved financial stability has prompted a renewed effort.
Financial Performance and Business Adjustments
To improve profitability, Droom has restructured parts of its business. It expects to achieve EBITDA positivity in FY26. Founder and CEO Sandeep Aggarwal stated that the company is currently growing at an annual rate of 70-90%.
In FY23, losses were cut by 54%, reducing to INR 62 crore from INR 137 crore in the previous year. However, revenue declined by 32%, falling from INR 390 crore to INR 262 crore. This drop resulted from exiting budget car sales to focus on mid, premium, and luxury-car segments, which yield higher margins.
As of June 2024 (Q1 FY25), Droom reported an annual gross merchandise value (GMV) of INR 4,000 crore and annual revenue of INR 200 crore. By the end of FY25, it projects a GMV exceeding INR 5,000 crore and revenue above INR 250 crore. Looking forward, the company anticipates 50% annual growth in FY26 and FY27.
Droom Pre-IPO Fundraising and Investment Strategy
Ahead of the IPO, Droom plans to raise INR 200 crore (about USD 23 million) in a pre-IPO round. It is targeting investments from Indian family offices, high-net-worth individuals (HNIs), and notable stock market investors. This strategy aligns with Zepto’s recent approach, which prioritized domestic investors.
Droom’s last major funding round was in 2021 when it secured USD 200 million from investors including 57 Stars and Seven Train Ventures. To date, the company has raised approximately USD 341 million (~INR 2950 crore).
Growth in the Used Car Market
India’s used car market is expanding rapidly. In FY23, around 51 lakh used cars were sold, with a market valuation of USD 34 billion (~INR 2,94,380 crore). According to a report by ‘car&bike’ and ‘Das WeltAuto by Volkswagen,’ the sector is projected to reach USD 73 billion (~INR 6,32,053 crore) by FY28, with sales expected to double to 1.09 crore vehicles.
Droom is focusing on premium cars, as vehicles priced above INR 10 lakh are growing faster than budget-friendly options. This segment shift aligns with broader market trends favouring higher-end vehicle purchases.
Diversification and Competitive Landscape
Droom has expanded its business model beyond car sales. It generates revenue through financing, software services, and advertising. The company earns a 3% commission on car loans and up to 27% on insurance premiums. In 2023, it introduced Droom Cloud Service to offer enterprise software solutions.
Competition includes platforms like Cars24 and Spinny. Cars24 provides vehicle servicing, insurance payments, and financing, while Spinny has structured its business to combine budget and luxury car sales under Truebil and Spinny Max.
Droom is also expanding into new automobile categories. It collaborates with major automakers, including Audi, Hero Electric, Hyundai, Mahindra, Tata, Mercedes-Benz, and Royal Enfield, to facilitate both new and used electric vehicle (EV) sales. Since most EV sales occur through business-to-business (B2B) transactions, Droom has adjusted its model accordingly.
Droom IPO Plans – Regulatory Impact
A recent increase in Goods and Services Tax (GST) on used cars from 12% to 18% has affected many businesses in this sector. However, Droom has been less impacted since it operates as a marketplace rather than a direct buyer and seller. The tax hike primarily affects companies that purchase vehicles, allowing Droom to maintain competitive pricing.
Conclusion
Droom IPO represents a significant step in its expansion strategy. The company has strengthened its operations, improved financial performance, and shifted focus to higher-margin segments. With diversified revenue streams and a growing presence in the premium car market, Droom is positioning itself for long-term stability ahead of its public listing in 2025.
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