Droom to launch Rs.3,000 crore by June 2022
Even as the IPO markets show signs of a revival, many of the digital IPOs that hit the IPO market in October and November last year are still well below their issue prices. Paytm, CarTrade and Policybazaar are cases in point.
However, that has not deterred Droom Technologies from aggressively pursuing its IPO plans. Incidentally, Droom offers an auto marketplace and would be in the same industry as CarTrade, which has done quite badly.
It is in this rather challenging environment that the agnostic auto marketplace, Droom Technologies, is set to launch its Rs.3,000-crore IPO. The IPO is likely in the next 2 months.
The Droom Technologies IPO will comprise of a fresh issue of equity shares to the tune of Rs.2,000 crore and an offer for sale (OFS) of around Rs.1,000 crore. This is as per the DRHP filed with SEBI. However, most of the dilution of equity is happening from the end of PE investors in Droom.
The promise of the promoter, Sandeep Aggarwal, is that he would not offload stake till the company reaches a valuation of $5 billion.
Droom is already a Unicorn, but $5 billion is still some time away. Aggarwal, and his 200 employees holding ESOPs, are likely to sell less than 1%, while other investors will sell over 5%. This is likely to give a good degree of confidence to the investors in the IPO that the promoters are going to stay put for a long time.
How will the fresh issue component of Rs.2,000 crore be used by Droom. According to the DRHP filed by the company in November, Droom plans to spend around Rs.500 to Rs.600 crore on acquisitions in the next two year.
For these inorganic acquisitions, Droom will partially fall back on its internal accruals and partially on the proceeds from initial public offering. The funds will also be used for organic expansion of the business.
Aggarwal, the founder of Droom, holds 32% stake in Droom. Incidentally, Aggarwal is the former founder of value e-commerce marketplace Shopclues, so he comes with an ecommerce mindset and deep knowledge of the ecommerce ecosystem.
Droom is 9% owned by the employees, while the investors own the balance 59%. Droom had raised its last funding round in Jul-21 at $1.2 billion valuation. Among its major investors are 57 Stars, Seven Train Ventures, Lightbox and Toyota.
The potential for Droom largely emerges from the massive unorganized market for used cars in India. Companies like Droom are trying to take that market place into the organized mode. That is a huge opportunity for the asking. You can just look at the numbers to get an idea.
The ratio of used cars sold to new cars sold in India has gone up from 1.1X to 1.5X over the last 8 years. Till date, only the surface has been scratched. The real potential is still waiting to be unlocked.
Of course, as the IPO opens, it must be mentioned that the CarTrade IPO and its post listing performance may be an overhang on the demand for the stock.
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