SoftBank-backed Cars24 lays off 600 employees in cost-cutting drive

SoftBank-backed used cars retailer Cars24 has laid off more than 600 employees or about 7 percent of its workforce over the last few weeks in a cost-cutting exercise as the company looks to go public in a few months, according to two people familiar with the matter.

Cars24, which also counts venture capital firms like Alpha Wave Global, DST Global and Falcon Edge, among others as its backers, has let go of employees across divisions, mostly at lower positions, including a few at its physical stores, the people said requesting anonymity.

“Cars24 has been looking to cut its costs as new investors are not comfortable with its burn,” said a person cited above.

“The company is definitely looking to go public in the next few months as some early investors are looking to exit. Looking at the public markets and how they are dumping new-age tech companies due to high cash burn and low profitability, the company is looking at reducing costs,” the person added.

News website Inc42 reported the development first.

Cars24 joins the likes of well-funded tech startups such as Vedantu, Unacademy, and Meesho to lay off hundreds of employees as investments have dried up. Venture capital and private equity firms are going slow on funding tech companies in India and elsewhere due to rising inflation across the globe, tightening of monetary policies by central banks and the ongoing war in Europe.

Moneycontrol reported last week that Japan’s SoftBank Group, which has been a prolific tech investor in India and across the world, will be reducing investments to a fourth in 2022 compared to 2021. Tiger Global Management, another aggressive tech investor also changed its strategy and is now looking to back more early-stage companies, due to slowdown in global financial markets, Moneycontrol reported.

With a slowdown in funding, many tech startups have resorted to layoffs or have even shut non-core verticals. According to data collected by Moneycontrol, so far in 2022, tech startups have fired over 4,500 employees.

“Investors in general are not okay with high cash burn models of most of these new-age tech startups as they fear they might not get decent exits looking at how public investors are treating some new tech companies,” said an investment banker requesting anonymity.

“Customer acquisition cost of some of these companies is too much and it doesn’t look like it will come down. So in a rising interest rate scenario, who will want to take bets on companies that have less chances of achieving profitability?” the banker added.

Founded in 2015 by Vikram Chopra, Gajendra Jangid, Ruchit Agarwal, and  Mehul Agarwal, Cars24 runs a  technology platform where consumers can buy, sell and finance used cars.  The company was last valued at over $3 billion.