Amid Market Volatility, Droom Withdraws INR 3,000 Cr IPO Bid

As negative market sentiment continues to weigh heavily on new-age tech stocks, online car marketplace platform Droom has now withdrawn its INR 3,000 Cr initial public offering (IPO) bid.

In its weekly observation data issued on October 14, SEBI noted that the issue was ‘withdrawn on October 12, 2022.’ 

While there was no clarity immediately on what prompted the withdrawal, the move could likely be attributed to raging market volatility and plummeting new age tech stocks. With no clear path to profitability and mounting losses, Droom faces major hurdles as funding winter worsens cash crunch across the industry.

This comes nearly a year after Droom filed its draft red herring prospectus (DRHP) with the market regulator in November last year. Droom had planned to raise INR 3,000 Cr through the public market, including a fresh issue of shares worth upto INR 2,000 Cr and an offer for sale amounting to INR 1,000 Cr. 

Companies such as ICICI Securities, Nomura Financial Advisory and Securities, Axis Capital, Edelweiss Financial Services, HSBC Securities and Capital Markets and KFin Technologies had signed up to be the joint bookkeepers of the offering.

If listed, Droom would have become the second car marketplace in the country to have listed on the bourses, after Cartrade. 

Founded in 2014 by Sandeep Agarwal, Droom offers an online platform where users can buy and sell used and new automobiles in India. It operates across multiple verticals including B2C and C2C, and across multiple price formats such as fixed prices, auctions. 

The startup had last raised $200 Mn in funding from a clutch of investors including 57 Stars and Seven Train Ventures. The round had propelled Droom into the unicorn club, pegging the valuation of the Gurugram-based startup at $ 1.2 Bn.

As of September 2021, Droom had 1.15 Mn vehicles listed on the platform across 11 vehicle categories, with a presence in multiple Indian cities. Droom primarily competes with startups such as Cars24, CarDekho, Spinny, among others.

A Saga Of Mishaps

Droom follows a long list of new age tech startups that have had to shelve or postpone their IPO plans. Earlier this year, giants such as OYO, boAt, Snapdeal, Pine Labs and even PharmEasy have more or less deferred their plans to list on stock markets. 

In instances involving players such as MobiKwik, SEBI’s nod for listing on markets is set to expire in October this year. Subsequently, these players will have to apply afresh for their IPO in the future. 

As if this was not enough, many players are also looking at raising funding to tide over the ongoing funding winter. Epharmacy giant PharmEasy has reportedly begun its rights issue to raise up to INR 750 Cr through convertible notes. Hospitality major OYO too has availed debt through term loan B amidst the bearish trend currently engulfing the Indian markets. 

According to a report, the Indian used car market was pegged at $32.14 Bn in 2021, and was projected to reach $74.70 Bn by 2027.

With the market continuing on a downward spiral, the situation appears to be grim for Droom. From a mega $200 Mn fundraise in July last year to pulling out its IPO bid this year, Droom has had a major reversal of fortunes. However, it now remains to be seen if Droom also woos investors to raise funds or will it cut corners going forward.