Projections of exponential revenue growth and profitability in the near term, plans of acquisitions and overseas expansion, and ambitions to grab the lion’s share of the market—ShopClues co-founder Sandeep Aggarwal has bullish claims about his second venture Droom, an online marketplace for buying and selling cars and two-wheelers, even though it is barely three years old.
In an interview with Techcircle, Aggarwal says the company saw strong growth in 2016 and will continue the momentum into 2017, ending the current calendar year with Rs 4,500-5,000 crore in annualised gross merchandise value (GMV) and turning profitable latest by February 2018. But Droom remains a frugal company, says Aggarwal, and it will raise the next round only to make sure that capital is not the reason why it can’t own 50-80% of the market. Excerpts:
What are Droom’s current offerings?
Droom is an online marketplace that acts as an enabler. We offer auctions, fixed prices and best offers. In 2016, we launched three ecosystem services: Orange Book Value, which is the first and only auto pricing engine in India; Droom History, the largest repository for used vehicles; and Droom Eco, a used vehicle inspection service.
As for features, we have a buyer protection plan, under which we can issue a refund if the user doesn’t like the vehicle after purchasing. We have ratings and reviews for buyers/sellers as well as vehicles, and these are arrived at using multiple parameters.
How are you competing with the offline market and other online players?
The existing players in the online space are either in the classifieds or the discovery space. But, with Droom, we became India’s first end-to-end transaction marketplace, providing tools that were missing in the ecosystem. When we started, people were thinking why the world needs another company but now it’s clear that we are creating a new category.
What is your business model?
Our main source of revenue is commission on vehicle sales on the platform. That is our bread and butter, and it accounts for 85-90% of our revenue.
Besides, some auto dealers want additional services, tools and features. For them, we have something called Pro-Seller premium subscription, for which they pay us Rs 15,000 per year; though small, it is pure profit. That makes up 5% of our total revenue.
With almost 12% of India’s advertising industry accounted for by the auto sector, we are also getting some ad revenue. Besides, we have started monetising Orange Book Value, which is a premium product.
How many listings do you have on your platform? What kind of transaction volumes are you seeing?
We have so far seen around 3.3 lakh listings, including both old and new vehicles. For the first two years, we were available only in the old vehicle category since we thought we were not going to add value in the new vehicle market. About 45 days back, we entered the new vehicle category. Today, we have the largest collection of original equipment manufacturers (OEMs) on our platform.
As for transactions, in December 2016 we saw about 7,500 transactions on our platform, primarily for used vehicles.
What are your views on M&A in the space? Are you looking for acquisitions?
We will be looking for acquisitions in 2017 not for growth, net revenue or GMV, but for technology and acqui-hires. We will always look for cash acquisitions because we don’t want to dilute equity. If someone has a pricing algorithm, has aggregated automobile services using some kind of technology, or has a data warehousing team, we will be open for such acquisitions.
Our corporate development team has looked into 150 companies in the automobile ecosystem, and we have been in talks with 6-8 of them for the last three months. We may end up acquiring 2-3 companies in calendar year 2017. We have allocated Rs 30 crore-35 crore for the acquisitions.
Are you in talks to raise more funding?
We are a very frugal, data-driven company and we spend very little. We haven’t even started spending money from the Rs 200 crore that we raised last year. We have built this entire company from the first two seed rounds and the Series A round that was led by Lightbox Ventures. We will raise the next round only to make sure that capital is not the reason why we can’t own 50-80% of this market.
As for fresh funding, we have seen a lot of inbound interest in the last four months.
Do you have any plans for international expansion?
In 2017, we will look to expand internationally to Indonesia, Malaysia, Vietnam, Thailand, Singapore and the Philippines. We actually wanted to expand internationally in the last quarter of 2016, but that got delayed. By April, we will be in Indonesia and, hopefully, in every 45 days, we will be in a new country.
Will you be looking at new verticals in the coming year?
We have an ecosystem of services, including warranty, roadside assistance, insurance, car care and retailing. One of the things we are planning to launch this year is Droom Credit, a consumer loan product with a marketplace approach. When it comes to auto loans, there is a lot of time and paperwork involved, and we want to fix that problem. We also expect to add 12-15 OEMs in calendar year 2017, apart from three-wheelers and commercial vehicles.
How do you see 2017 panning out for Droom?
In 2016, Droom proved how it is different from online classifieds and discovery platforms. I think we will end FY2016-17 with Rs 2,000-2,500 crore in annualised run-rate, and exit calendar year 2017 with Rs 4,500-5,000 crore in annualised GMV.
In terms of revenue, we will clock Rs 60-75 crore by March 2017 in annualised run-rate, and Rs 125-150 crore in net revenue by December 2017 in terms of annual run-rate. Also, between November 2017 and February 2018, we should be fully profitable.