Cars24 in talks to close $350-million funding round at $2-billion valuation

While the discussions are underway at a $1.6 billion valuation, post funding Cars 24 will be valued at $2 billion, these people said.

Last November, the used car marketplace
drove into the unicorn club after picking up $200 million at a valuation of over $1 billion. DST Global, which has backed Indian startups like Swiggy, Udaan, Ola and Byju’s, had led the previous round as well.

“The round is oversubscribed and the final size could be between $300-350 million.. There is a lot of interest from new investors,” said one person in the know.

The official closing of the investment round is still a month or so away, the person added.

Cars24 cofounder and CEO Vikram Chopra did not respond to ET’s query.

Falcon Edge, SoftBank, Carlyle and DST Global also did not comment on an emailed questionnaire until press time Thursday.

Exor Seeds, Moore Strategic Ventures, and Unbound are among Cars24’s existing investors.

Increased Demand

Since the Covid-19 virus outbreak, Cars24 and other online platforms dealing in the used car business have seen a significant upswing. Cars 24 has seen wider demand for used vehicles. It has been planning to offer new services like sale of two-wheelers and also provide after sales services.

According to a recent report by consulting firm RedSeer, India’s used car market is likely to see significant, technology-driven growth in the coming years as people shun public transport in the aftermath of the Covid-19 pandemic. ET reported on August 16 that the car services and repairs market is estimated to grow at a compounded annual growth rate of 12% to reach $25 billion by 2030, as compared to $8 billion last year, the RedSeer report added

Typically, Gurugram-based Cars24 buys cars from sellers in around 130 cities and sells those vehicles across 400 cities, after refurbishing them in its workshops spread across the country. The vehicles are subjected to certain quality tests before they are listed on the platform. In June, the company announced it had enabled buying used cars online, similar to any other product, with home delivery of the vehicles along with a six-month warranty and a no-questions asked 7-day return policy.

A person in the know told ET that Cars24 is selling around 18,000 vehicles every month.

The company had reached an annualised sales run rate of $600 million late last year compared to around $480 million in February 2020, indicating the fast recovery it had made after the first wave of the pandemic and started clocking higher sales than pre-pandemic levels. Annualised sales run rate is a projection of upcoming sales based on the sales clocked in a previous month.

According to a recent statement by Cars24, it plans to set up seven refurbishment facilities in the top metros to service around 20,000 cars per month. It has around 20 ‘car studios’ that are cataloguing around 400 cars a day to enable smoother experience of online shopping for its vehicles.

While it has been predominantly a four-wheeler selling platform, Cars24 forayed into two-wheelers last year as demand shot up for them in the wake of Covid-19, especially outside top metro cities. In June, the firm said it has forayed into overseas markets like Australia and UAE and plans to enter markets like South East Asia and the Middle East this year as well.

The company also has its own non-banking financial arm through which it offers financing options to both its dealers and consumers.

Started in 2015 by Chopra, Mehul Agrawal, Ruchit Agarwal and Gajendra Jangid, Cars24 had sold about 5,000 cars as of June this year.

Global Models

The new funding in Cars24 comes at a time when homegrown used car selling platform CarTrade has filed for Rs 2,999 crore initial public offering (IPO) that has been subscribed over 20 times. It is slated to start trading from Friday.

Last month, US-based Tiger Global took a bet on another used car selling platform Spinny by leading a $108 million funding round which valued it at around $800 million. Just in April, it was valued at around $350 million after a $65 million funding.

According to industry sources, both Spinny and Cars24 are rivals but they started with different models. “Cars24 was more focused on the supply side while Spinny focused on the demand side. That has changed now, and Cars24 is putting a lot of its focus on the demand side as well,” a senior industry executive who has tracked both the companies said. Spinny also started as a marketplace for used vehicles but later had to become a platform offering full-stack services.

Cars24’s new investor SoftBank has backed similar models in markets like Germany where it invested in Auto1-one of the leading startups in Europe that went public by listing on the Frankfurt stock exchange, earlier this year, raising over $2 billion. Auto1 shares had rallied over 45% on the day of its listing.

Last month, Droom, another Indian automobile marketplace, said it has received the first tranche of its $200-million, pre-IPO funding round at a valuation of $1.2 billion, making it one of the latest unicorns this year.

Also Read:
India’s used car market to see significant, tech-driven growth: Report