Droom Technology files DRHP, to raise Rs 3000 crore from IPO

Automobile ecommerce marketplace Droom has filed its Draft Red Herring Prospectus (DRHP) with markets regulator SEBI to raise upto Rs 3000 crore from an Initial Public Offering (IPO). 

This will be the second IPO in the automotive commerce space after Cartrade's public market debut in August. 

The public offering will include fresh issue of shares aggregating Rs 2000 crore, and an offer for sale of shares upto Rs 1000 crore by Droom Pte, which is the sole promoter of Droom Technology. 

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Droom, founded in 2014 by Sandeep Aggarwal, will utilise Rs 1,150 crore for organic growth initiatives including expansion to Tier III and IV cities and international expansion, apart from acquisition and marketing and branding activities for sellers and buyers. Separately, Rs 400 crore will be utilised towards funding inorganic growth.

The company was last valued at $1.2 billion during a $200 million pre-IPO funding round from new investors 57 Stars and Seven Train Ventures.

In the filing, the company has said that it might consider raising Rs 400 crore in a pre-IPO placement, with the amount raised being reduced from the amount of fresh issue of shares.

ICICI Securities, Nomura Financial Advisory and Securities, Axis Capital, Edelweiss Financial Services, HSBC Securities and Capital Markets and KFin Technologies are the joint bookkeepers of the offering. 

Here are some key points from the DRHP:

• The company registered loss of Rs 68.8 crore for the FY 2020-21, as compared to Rs 89.6 crore for FY 2019-20. However, the company’s losses for the first quarter of FY 2021-22 ending June 30, 2021 stood at Rs 32.5 crore.

• Droom Technology’s revenue from operation was adversely affected due to the pandemic. The company clocked Rs 125.3 crore in revenue from operations in FY 2020-21, compared to Rs 172.1 crore in FY 2019-20.

• The company’s GMV declined from Rs 6,697.6 crore in FY 2019-20 to Rs 5,019.4 crore for FY 2020-21 due to the pandemic. For the first quarter of FY 2021-22 ending June 30, Droom Technology recorded GMV of Rs 2,815.8 crore.

• Droom spent 2.46 percent of its GMV on promotions, incentive expense, advertisement and other marketing activities in FY 2020-21. This stood at Rs 123.7 crore. The comparable figure for the previous financial year was 2.97 percent of GMV at Rs 198.6 crore. 

• The company cut down its investments commitments from Rs 25.7 crore in FY 2019-20 to Rs 0.172 crore for FY 2020-21. However, the expenditure was back for FY 2021-22, with the company spending Rs 14.5 crore for the three month period of April to June, 2021.

• Droom, which acquired NBFC Xeraphin Finvest in 2019, will utilise Rs 400 crore for strategic acquisition opportunities to access new geographies, categories and services. It will also look at acquisitions to enhance its technology platform with a focus on blockchain, AI/ML, big data analytics and IoT space. The company will also evaluate regional or last mile delivery players for doorstep delivery of vehicles as part of its Droom Velocity offering.