Gurugram based Droom Cloud sells vehicles through dealers where sourcing and refurbishment is done by physical dealers. Certification, sales and distribution are done by the company.
ET learns that the company is looking for acquisitions across the entire chain from auto insurance to auto lending. Droom is looking for an IT services company to attract a talent pool, and is also keen to buy an organized service station chain, such as Pitstop and GoMechanic.
The company plans to spend around Rs 500-600 crore on acquisitions in the next two years. People with knowledge of the matter said that the amount to be paid for the acquisition will be a mix of internal accruals and the amount received from the initial public issue.
Lightbox-venture-backed Droom Technology plans to raise Rs 3,000 crore from an initial share sale. The company had filed its draft red herring prospectus with market regulator SEBI in November 2021.
The company is eyeing a valuation of $2 billion for its IPO. The company’s last funding came about 15 months ago at a valuation of $1.2 billion.
According to the filing, the company plans to spend around Rs 400 crore on inorganic growth initiatives and Rs 1,150 crore on organic growth from the funds raised from the fresh issue of shares in the IPO.
“The process of selecting acquisition targets has already started and it has recently appointed a consultant to explore inorganic opportunities in the insurance sector and recently it has acquired the auto portfolio of a South-based company. Turned down a deal because it strives to be in it. Debt aggregation instead of becoming an NBFC company,” said a senior executive of the company.
An email sent to the company did not elicit any response till presstime.
With all the services available under one umbrella, it will not only improve the GMV for used vehicles from more vehicles sold, but also increase the revenue from insurance, loans, certification and services business earned from the service station.
The company currently derives the bulk of its transaction revenue from vehicle sales, which account for about 3% of the sales value of vehicles.
Globally, used vehicle market companies generate half their revenue in vehicle transactions, and the remaining half comes from service income associated with the sale of pre-owned vehicles.
Droom’s transaction volume increased significantly during the COVID period. The company’s GMV reached around $2 billion in the current financial year. It stood at $1 billion in FY20, according to the company’s DRHP filings.
The company sold around 13,000-14000 vehicles per month on an average in the last financial year.
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