India Inc’s latest unicorn, online automobile marketplace Droom, has held active discussions with investment banks JP Morgan, ICICI Securities, HSBC and JM Financial as it looks to finalise advisors and raise around $300 million through an IPO in 2022, multiple industry sources with knowledge of the matter told Moneycontrol.
Earlier this week, the firm which is backed by the likes of Toyota and Lightbox said it had closed the first leg of its ongoing pre-IPO growth funding round of up to $200 million taking its valuation to $1.2 billion.
If its listing plans fructify, Droom would join rival Car Trade Tech which has received the SEBI nod for its Rs 2,000 crore IPO, the first ever in the highly competitive segment. Car Trade Tech is likely to launch its IPO shortly and on February 10, 2021, Moneycontrol first reported the Warbug Pincus and Temasek-backed firm’s listing plans.
“Droom is in talks with investment banks JP Morgan, ICICI Securities, HSBC and JM Financial and is expected to soon formally finalise the advisors for its IPO. The option for both an overseas or domestic listing is available,” said one of the persons cited above.
“They will look to raise around $300 million which is likely to be a primary issuance of shares. The market for online purchase and sale of cars is under-penetrated and consumers are increasingly comfortable transacting online in the post-pandemic era,” added a second person.
“The market is buoyant and through this IPO, Droom can raise money to expand further and strengthen its relationship with car dealers,” a third person told Moneycontrol, adding that post the stellar debut by Zomato, many new-age companies are eyeing a domestic listing.
Cars24, Quikr, Olx and Mahindra First Choice Wheels are other players which compete with Droom. The firm's other investors include Beenos, Beenext, Digital Garage, Integrated Asset Management and office of Joe Hirao (founder of ZigExn)
All the three persons spoke to Moneycontrol on condition of anonymity. JP Morgan and HSBC declined to comment. Moneycontrol could not elicit an immediate comment from ICICI Securities and JM Financial.
In response to an email query from Moneycontrol, Sandeep Aggarwal, Founder & CEO of Droom said, "We are in active talks to onboard many investment banks and law firms. At this stage, we cannot confirm which ones we have shortlisted or will be shortlisting for our possible IPO. Yes, we are looking at $300 million or so in the IPO and 100 percent of this will be primary and not secondary. None of the existing investors or the company insiders or me as the founder are sellers for the stock in our IPO due to significant upside to our story post IPO."
While announcing its latest fundraising round, Droom said it is pursuing a dual track for a possible IPO, and aims to be listed either on NASDAQ or in India.
Droom’s current annual run-rate is $1.7 billion for gross merchandise value and $54 million for net revenue. The company remains on track to touch a GMV of $2 billion and a net revenue of $65 million in calendar year 2021. It claims to be having over 1.1 million automobiles on its platform from over 2.6 lakh dealers."Over the past seven years, we have invested millions of dollars and thousands of human hours to build a full technology-based end-to-end transactional marketplace for buying and selling of automobiles online. We have developed the complete technology-based machinery starting from first-mile services such as OBV, ECO, mid-mile services like loan and insurance and last-mile services like doorstep delivery. Droom has been on a steady growth trajectory after Covid. While automobile is the largest retail category, it is the least penetrated online. In a post-pandemic world, we expect automobile buying and selling to shift online rapidly," Sandeep Aggarwal said earlier.