Droom Technology Ltd IPO

Droom Technology is a technology and data science company that helps in purchase and selling of automobile, through a combination of the asset light a...

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Synopsis

Last Updated: 24 July 2023 4:23 PM by 5Paisa

Droom Technology, an automobile marketplace, has filed for an IPO with SEBI, worth Rs.3,000 crore. This issue comprises of a fresh issue worth Rs.2,000 crore and an offer for sale worth Rs.1,000. The promoters, Droom Pte ltd and Sandeep Aggarwal hold a 100% stake in the company. The company is considering a private placement of around Rs.400 crore. The book running lead managers to this issue are ICICI Securities, Axis Capital, Edelweiss Financial Services Ltd, NOMURA Financial Advisory and Securities Ltd, HSBC Securities and Capital Markets Pvt Ltd.

Objective of the issue:

1. Rs.1,150 crore of the net proceeds is to be set aside to fund organic growth initiatives.
2. Rs.400 crore of the net proceeds is to be set aside to fund inorganic growth initiatives.

About Droom Technology Ltd

Droom Technology is a technology and data science company that helps in purchase and selling of automobile, through a combination of the asset light automobile e-commerce platform and technology driven system of services and products for the automobile industry. The company has the largest auto portal in the country, with a 65% market share. Droom offers 6 different products and services, namely; Droom discover- for vehicle research, Orange book value- this is a vehicle pricing engine that has received over 45.07 crore search requests as on September 31, 2021, ECO- the inspection service, History- a collection of the vehicle history, Droom credit- a financing platform focused on automobiles and lastly, Droom velocity- a last mile delivery and fulfillment.

Since the operations started started in 2014, the business has been developed time and time again to keep up with the wants of the market and to stay relevant. The number of app downloads have increased at a CAGR of 5.12% from 12.85 million in FY19 to 14.20 million in FY21. As on 31 September, 2021, the number of downloads stands at 14.46 million. The company has good relations with various banks and NBFCs like Yes Bank, Tata Capital Financial Services Ltd, Bajaj Finance Ltd etc.

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.

Droom Technology Ltd Financial Status

Particulars (In Rs cr)	Q3 ended June 30, 2021	FY2021	FY2020	FY2019
Revenue from operations	79.08	125.33	172.17	135.96
PAT	(32.58)	(68.88)	(89.60)	(105.37)
EPS	(2.42)	(5.21)	(7.04)	(10.12)

Particulars (In Rs cr)	Q3 ended June 30, 2021	FY2021	FY2020	FY2019
Total assets	170.40	114.83	136.47	129.02
Equity Share Capital	1.35	1.10	1.10	0.86
Total borrowings	16.04	16.46	31.01	33.39

Operational performance of the company - Key indicators:

Particulars	As on 31 September, 2021
Traffic (in cr)	8.93
Number of Auto dealers	20,725
Number of cities	1,151
Number of vehicle categories	11
Number of used vehicles listed	278,807
Value of used vehicles listed (in Rs bn)	146.49
Vehicles sold	56,412
GMV (in cr)	5,934.72

Peer comparison:

Company	GMV	Operating Revenue	EBITDA Margin	PAT	PAT Margin
Droom	6,697.6	172.2	(43.8%)	(89.6)	(49.4%)
Car Trade Tech	-	298.3	12.4%	31.3	9.8%
Cars24	2,998.1	2998.1	(8.7%)	(285)	(9.3%)
Cardekho	-	706.3	(44%)	(326.5)	(43.4%)
Spinny	-	11.4	(440.7%)	(76.5)	(432.2%)

Droom Technology Ltd IPO SWOT Analysis

Strengths

1. 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.

2. 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.

3. 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.

4. The founder, Sandeep Aggarwal, is recognized as among the 30 Influential Business Leaders 2017 by Insight success.

Risks

1. 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.

2. Failure to maintain the technology and various platforms of the company will lead to low quality of service and loss of business.

3. 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.

4. A decrease in the number of auto dealers on the platform will have material effect on the operation of the business.