FB Pixel no scriptIndian used vehicle market heats up with bigger funding rounds, IPOs | KrASIA

Indian used vehicle market heats up with bigger funding rounds, IPOs

Written by Moulishree Srivastava Published on   3 mins read

Heavyweight investors including SoftBank, Falcon Edge, and Tiger Global have pumped hundreds of millions of dollars into India’s used car segment since the start of this year.

India’s pre-owned vehicle market is heating up as marquee global investors pour in hundreds of millions of dollars into the rapidly growing segment, and incumbents start eying public markets.

Gurugram-based Cars24, which runs a platform for selling and buying used motorbikes and cars, recently raised USD 450 million in Series F from SoftBank, Falcon Edge, and Tencent, along with participation from existing investors. The deal comprises USD 340 million in equity funding and USD 110 million in debt, valuing the company at USD 1.84 billion.

The six-year-old startup entered the elite USD 1 billion plus-club in November 2020 after landing a USD 200 million check from DST Global. The latest round has nearly doubled its valuation.

Cars24 plans to use the fresh funding to enter and expand in overseas markets as well as build its cars, bikes, and financing business in the country, the company said in a statement on Monday. It launched operations in the UAE in April and announced its foray into Australia two weeks back.

Notably, Falcon Edge—which has a significant presence in the Middle East—has come onboard Cars24’s cap table after the startup commenced its operations in the UAE. Cars24 said it has sold close to 1,000 cars in the Gulf country in the last six months.

“We have studied used car 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. “Cars24 has cemented its first-mover advantage by building wide-ranging supply side moats, which in turn drive demand liquidity on the platform.”

“We are deeply impressed by the founders’ leadership, and are thrilled to back them as they transform the used car industry in India and scale internationally across the Middle East and Southeast Asia,” he added.

Cars24 was set up by former Sequoia investment analysts Vikram Chopra, Mehul Agrawal, Ruchit Agarwal, and Gajendra Jangid in 2015. It deploys an asset-heavy model, wherein it buys cars and motorbikes directly from the owners on behalf of the auto dealers and then sells them on its platform. It makes money by taking a percentage from each transaction. The startup has operations in over 200 cities in India, with an offline presence in more than ten cities. Cars24 claims to have more than 13 million monthly website and app visitors and to have processed more than 400,000 transactions so far.

Earlier in July, its rival Spinny closed a USD 108 million Series D round led by Tiger Global. That same month, another competitor, Droom, said it received the first tranche of USD 200 million pre-IPO funding round, which turned it into a unicorn at a valuation of USD 1.2 billion. The automobile platform is reportedly looking to file draft papers for a USD 135 million IPO with the Indian market regulator in the next couple of months.

Droom’s IPO will follow the public listing of CarTrade, an online marketplace for new and used vehicles that took place last month. Through the public issue—which was a complete offer for sale by existing investors and shareholders—CarTrade raised INR 29.9 billion (USD 403 million), giving its backers a successful exit.

In August, ride-hailing giant Ola also entered the used car retailing business in a bid to diversify its product portfolio after the COVID-19 pandemic dampened the demand for its core business. Since last year, the pre-owned vehicles segment has been witnessing accelerated growth, with many consumers opting to buy used cars instead of taking cabs due to fear of catching the deadly virus. According to a report by Autocar, 3.8 million used cars were sold in the financial year ended March 31, 2021, compared to 2.6 million new cars. About 64% of the customers who bought pre-owned vehicles were first-time car buyers. The report also predicts that the used car market will reach 8.2 million units by FY 2025, which will make it twice as big as the new car segment.

Overall, the Indian used car market size is projected to touch USD 70.8 billion by 2030 from USD 18.3 billion in 2020, growing at a 14.8% CAGR between 2021 and 2030.


Auto loading next article...