CARS24 valuation soars to $1.8 billion after raising $450 million

Fundraise includes Series F equity round of $340 mn, debt of $110 mn

India’s largest online marketplace for used cars, CARS24 Services, has closed a $450 million funding round that has almost doubled its valuation to $1.84 billion.
 
The funding includes a $340 million Series F equity round, coupled with $110 million debt from multiple financial institutions.
 
This is the biggest round for the six-year-old start-up, which also saw participation from Tencent and existing investors such as Moore Strategic Vent­ures and Exor Seeds. Existing investors like Yuri Milner’s DST Global and the US’s Fal­con Edge also invested.
 
Last November, CARS24 raised $200 million in a series E funding round, which valued it at over $1 billion and made it the first unicorn in India’s auto space. The capital from the lat­est fundraise is likely to be used to build warehouses to re­co­n­dition old cars.
 
The company buys cars from individual sell­ers, reconditions them — wh­ich incl­udes quality checks, mi­nor or major fixes — and th­en makes the car available for sale.
 
The pre-owned cars market is expected to more than double to 8.2 million units or $47 billion by financial year 2025-26 (FY26) from 4 million units in FY21 or $17 billion, which means that two used-cars are expected to be sold for every new one, according to a report by JM Financial.
 

“The biggest problem that customers face while buying a pre-owned car is where does he find the desired model. When a consumer comes to CARS24 , he finds 10,000 cars to choose from, whereas he will find a maximum of 50 models in a dealership. This is an incred­ibly hard business to make, you have to solve difficult problems in logistics, but despite that we have had high satisfaction sco­res from customers,” said Vik­ram Chopra, co-founder and CEO of CARS24.
 
In FY20, the fi­rm reco­r­ded consolidated rev­e­nue of Rs 3,056 crore, compared to Rs 1,687 crore recorded the previous year. Chopra said as more organised players em­erge in the used cars business, trust will increase among customers.
 
“Out of 100 people in India, two own a car. Most people do­n’t have a car because they can’t afford it, which makes pre-owned cars a very viable business model, because it’s more affordable,” Chopra said.
 
With supply-side disruptions like the shortage of semiconductors preventing auto companies from rolling out new models and meeting the increased demand, the de­m­and for used-cars surged over the past year. Besides, the amid the uncertainty sparked by the pandemic there is an increased preference for affordable used cars, according to the JM Fin­ancial report.
 
India’s largest carmaker, Maruti Suzuki, said production in September may drop by as much as 60 per cent due to shortage of semiconductors.
 
In fact, SoftBank has inves­ted in a number of online used-car vendors around the world, including China’s Chehaoduo, Mexico’s Kavak, and Carro in southeast Asia.
 
“Investors say they find val­ue in the business model as the company is trying to organise the fragmented used-cars market using technology. We have studied such platforms glo­bally and are struck by the similarities we see between CARS24 and analogous businesses that have scaled successfully,” said Navroz D Udw­adia, co-founder of Falcon Edge Capital