Droom’s net loss nearly doubled to INR 137 Cr from INR 68.8 Cr in FY21 despite the jump in its operating revenue
Led by marketing expenses, Droom’s total expenditure increased over 2.5X to INR 527.1 Cr in FY22 from INR 204.3 Cr in FY21
The startup, which withdrew its IPO last year, saw its EBITDA margin improve to -34.2% in FY22 from -46.9% in FY21
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Sandeep Aggarwal-led used car marketplace Droom’s net loss nearly doubled to INR 137 Cr in the financial year 2021-22 (FY22) from INR 68.8 Cr in FY21 on the back of a sharp rise in its expenses.
The company’s bottom line was hit despite an over 3X jump in its revenue from operations, as per its much-delayed financial statements filed with the Ministry of Corporate Affairs.
Droom’s revenue from operations zoomed 207% to INR 384.6 Cr in FY22 from INR 125.3 Cr in the previous year. The startup mostly generates revenue through commission from buyers, income from seller subscriptions, and advertisement fees. One of the primary reasons behind the increase in Droom’s revenue was the surge in demand for second-hand cars after the second wave of the COVID-19 pandemic.
Including other income, Droom’s total income rose 188% to INR 390 Cr in FY22 from INR 135.5 Cr in FY21.
On the expenses front, Droom’s total expenditure increased over 2.5X to INR 527.1 Cr in FY22 from INR 204.3 Cr in FY21. This increase was led by a sharp jump in marketing expenses. The startup’s marketing expenses, which comprise promotion and incentive expenses and advertising and promotional expenses, grew 228% to INR 406.3 Cr in FY22 from INR 123.7 Cr in FY21.
Overall, marketing expenses accounted for 77% of the total expenses. Droom spent INR 1.05 on marketing to earn every INR 1 as operating revenue during the year under review.
It must be noted that in its draft red herring prospectus (DRHP) submitted to the Securities and Exchange Board of India (SEBI) in 2021, Droom said it intended to finance its marketing and promotional activities from the proceeds of IPO to bring more traffic on its website and app. Droom claims to acquire customers through marketing, cashback and promotions, and dealers through marketing and business development personnel.
Meanwhile, employee benefit expenses were the second biggest contributor to Droom’s total expenses. Employee expenses rose 73% to INR 97 Cr in FY22 from INR 56.1 Cr in FY21. Employee benefit expenses comprise employee salaries, PF contributions, gratuity, and other employee welfare benefits. As per Linkedin, Droom currently has a headcount of 386 employees.
The startup’s EBITDA margin improved to -34.2% in FY22 from -46.9% in FY21. The startup’s operating cash flow stood at – INR 73.7 Cr in FY22 as against – INR 18.5 Cr in FY21. At the end of the year FY22, the startup had cash and cash equivalents of INR 5.2 Cr as against INR 90 Lakh at the end of FY21.
Droom, founded in 2014 by Aggarwal, offers an ecommerce platform where it connects used car passenger dealers with potential customers. The startup also provides financing through its tie-up with banks and NBFCs. By the end of 2021, Droom claimed to have a presence in over a thousand cities across the world, including in Southeast Asia, the Middle East and Africa.
The startup, which competes against the likes of Spinny, Cars24, and CarTrade, entered the coveted unicorn club in 2021 after raising $200 Mn from new investors such as 57 Stars and Seven Train Ventures.
Like many other startups which decided to go public in the bull market of 2021, Droom intended to raise INR 3,000 Cr through its IPO. The IPO was to comprise a fresh issue of shares worth INR 2,000 Cr and an offer for sale of INR 1,000 Cr. However, it withdrew its IPO last year amid negative market sentiment.
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