Droom founder explains why he is considering a US IPO and where he intends to spend the money
Droomis currently raising $200 million, at a unicorn valuation of $1.2 billion.
- Droom’s expansion plans are a mix of organic as well as inorganic strategies.
- It was founded in 2014 by Shopclues cofounder
The company is exploring listing opportunities in both India and the US. However, it is reluctant for a special purpose acquisition company (SPAC) option. SPAC is a company with no commercial operations that is formed strictly to raise capital through an initial public offering (IPO) for buying out an existing firm.
Interestingly, the company has no presence in the US as of now and no plans to expand into the territory in the next year or so. Yet, it is pursuing a dual-track plan for the IPO. The company previously noted that it plans to be listed either on US-based NASDAQ or in India in 2022.
“We started Droom seven years back, and it is clearly a new age company, a high growth company. We went to use a decent amount of capital to build a formidable scale. These [new age] companies were not rewarded in Indian stock exchanges. So from the day I founded the company, we have been a Singapore holding company. We are operating as a subsidiary in India.”
“I never thought, and I was a Wall Street analyst, that new age companies with no near-term visibility to profitability can be listed on BSE and NSE [National Stock Exchange], and can create a decent enough valuation. And there is a stock appetite among the investors and that has changed over the last couple of years,” he added, explaining why India is an option too.
Droom wants a global footprint
CEO Aggarwal, in an interaction with Business Insider, highlighted that the company will be using these funds to aid its growth and expand into international markets.
#HangoutwithBI: All you need to know about the first Indian startup from the auto space getting ready to hit the capital markets. @iyer_sriram in conversation with @letsdroom's Sandeep Aggarwal (@SandeepAgg). https://t.co/4dN4lzjbiQ— Business Insider India🇮🇳 (@BiIndia) July 30, 2021
Droom had already set up three offices in Singapore, Thailand and Malaysia before the pandemic hit.. However, it decided to hold off the international expansion plan beyond that due to travel restriction and capital conservatism during COVID-19. It has decided to take up this plan once again.
A bulk of the capital Droom raises would be invested into the Indian market, Aggarwal said. The company is looking to strengthen its presence in the top 100 Indian markets over the next couple of years.
Aggarwal noted that Droom has 0.56% share in India’s automobile market and even a three-fold increase to 1.3% share could generate $7-$10 billion in gross merchandise value (GMV) for the company in the next two and a half years.
The company claims that its current annual run-rate is $1.7 billion in gross merchandise value (GMV) and $54 million for net revenue.
In order to expand its presence in the Indian market, Droom is currently running a pilot programme in New Delhi to test out a new product called Droom velocity. It is a last mile delivery service that will deliver the bought cars to the end customers. Besides this, it is also investing heavily on artificial intelligence (AI) to refresh its technology.
“India is the third-largest automobile market in the world, after the US and China. Less than 1% of this market is online and bulk of that goes through us.The international expansion is because we are a technology company and we can replicate our playbook in other countries. Theoretically, in order to create the next 25-50 times more value for this company, we don’t need any geography to unleash this value.”
Acquisitions, investments in pipeline too
Aggarwal highlighted that even though they are going big on the international market, India will continue to be its biggest market.
Droom was founded in 2014 by Aggarwal, who had cofounded e-commerce portal Shopclues. Droom is a tech and data science-driven online automobile marketplace, which offers an e-commerce platform as well as technology solutions for buying and selling automobiles in India.
“We became contribution margin positive in September of last year and in our parlance it’s called contribution margin-3… As a two-time founder of an e-commerce company, trust me, reaching there in the seventh year of operations is [difficult],” he added.
Contribution margin positive is when the company’s net revenue is able to cover operational expense, marketing cost and other variable expenses.
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