Droom targets 100 cities for expansion

The company said it is in talks to raise funding and should be able to announce something soon

Droom, the used car marketplace, is planning to expand to 100 cities within the next month. The company has been ahead of schedule in revenue generation, its founder claimed, adding it was a natural progression.

“We are the biggest used car transaction platform in India and we want to continue the dominance,” said Sandeep Aggarwal, founder and CEO, Droom.

The company recorded revenue of Rs 36 crore in December 2015, with Rs 32 crore coming from the National Capital Region alone. “If we can generate so much interest in Delhi among the immense competition in the city, we can get some more in other parts of the city. This was the thinking when we decided to plan our expansion,” Aggarwal said. The company takes a commission of about two-five per cent per transaction.

“We expect to hit Rs 250 crore GMV (gross merchandise volume) by the end of this financial year and I think we are on track,” said Aggarwal.

Despite the fact that hyper-local companies across the country are shrinking back to the metros, Aggarwal remains bullish that Droom will not stumble the way others have. “We don’t have any personnel in most of these centres. To minimise these costs, we invested in what we call Droom University,” he said.

It is a concept similar to what Amazon does to help sellers list their products on its platform. “We have no feet on the ground and use channel partners to spread the word,” he said. One of the reasons why companies such as Droom gain traction is verified listings. “We offer verified listings as a service. And there we need a mechanic to inspect the cars, which would mean allocating a resource. But we have made strategic partnerships with AXA and Carnation and they have a presence in 4,300 cities. Now, their mechanic will verify the listing for us,” he said. Aggarwal also said that there was a one-time cost when going to new cities — when a seven-member team “lays the groundwork”.

The company allocates 85 per cent of its budget to technology and marketing, and this expansion will not weigh too heavy on the company’s books. Aggarwal claims that Droom’s costs have increased just five per cent since it started, while the revenue earned rose from Rs 6 lakh in January last year to Rs 42 crore this year.

Droom, he said, was looking to make acquisitions to increase its foothold in the market. “We will make an acquisition in the first quarter of this year,” he said. The company said it was in talks to raise funding and should be able to announce something soon.

“The market is bright for used cars. In China, eight marketplaces have cropped up in the past year and have raised $1.8 billion combined,” he said. The top 10 cities of India constitute almost 75 per cent of the used car sales.

Last week, used car marketplace Truebil raised $5 million from Kalaari Capital, Inventus and others. The company, started by former Housing.com employees, had raised $500,000 last year. This segment could well be the next big thing in India.