Can you tell me some basics about the proposed Droom IPO?

Even as a slew of digital IPOs, that recently listed, like Paytm, CarTrade and Policybazaar have been under pressure, Droom is planning to pursue its IPO plans aggressively. Incidentally, Droom offers an auto marketplace and would be in the same industry as CarTrade. The agnostic auto marketplace, Droom Technologies, is set to launch its Rs.3,000-crore IPO, most likely over the next 2 months.

The Droom IPO will comprise of a fresh issue of equity shares of Rs.2,000 crore and an OFS of Rs.1,000 crore. Most of the dilution in OFS will happen from PE investors and employee ESOPs. While Droom is already a Unicorn, the founder, Sandeep Aggarwal, does not plan to offload stake till the company reaches valuation of $5 billion. That gives confidence to investors. How will the fresh issue of Rs.2,000 crore be utilized?

Droom plans to spend around Rs.500 to Rs.600 crore on inorganic acquisitions and will also use part of the funds for organic growth of business. Droom raised last funding in Jul-21 at $1.2 billion valuation. Droom business model is based on the big shift likely from the unorganized to the organized market for used cars. Ratio has improved from 1.1X to 1.5X over last 8 years. However, the performance of CarTrade IPO could be an overhang.