Exclusive: Cars24 lays off over 300 people; downscales consumer financing play

Cars24, a dealer-focused online platform for used cars, had announced a $50 million funding round in July 2018. For several purposes, it had later decided to take this round up to $100-150 million. But it seems that the talks didn’t go through.

It did raise the announced $50 million and also managed to take the round to $69.86 million with an extra $19.86 million. Of this $11 million was received in April this year, and almost $10 million in May beginning.

Now, the company has raised a Rs 45 crore debt round from Trifecta Capital, signifying a preference to save on the cost of equity.

Sources indicate that this cost of equity isn’t the only expense the company is trying to save on. “Over 300 employees have been laid off in the past two months. To be precise, the entire Bengaluru tech team (about 16 people) were laid off while several hundred were a part of consumer finance, operations, and marketing teams,” said multiple sources inside and outside Cars24. 

Sources requested anonymity as they aren't allowed to talk to media. 

According to aforementioned sources, Cars24 also pulled the plug from listing business after testing it for about 4-5 months. However, Vikram Chopra, CEO and co-founder, Cars24 didn't admit to having any listing business.

About 70-80 people were laid off from the listing business, emphasised sources.

“This is a major lay-off and seems to be a fall out of the inability to take the round to the aspired $100-150 million figure,” outlined three sources sharing insights on the factors behind the events.

Not just that, the concentration of lay-off in the finance teams could also indicate a scaling down of its consumer-facing financing play, which would be an important development considering Cars24 has an entirely separate entity for the financial services.

"With partner banks, Cars24 used to help customers buying cars from dealers. However, now it had laid off the entire team of about 125-150 people looking after consumer finance vertical (known as DSA model)," added sources.

For the past month, Entrackr has contacted Chopra twice, to confirm these developments where he deemed the information baseless and a mere speculation.

“No lay-offs have taken place. We have asked few people to leave as a part of the performance assessment process, but nothing else. These numbers are unreal and we have no reason to engage in lay-offs,” he said.

Entrackr, however, has talked to sources including many former and some existing employees in the company, all of whom have emphasized the mass lay-offs across functions (300 plus).

On the other hand, earlier the $666.73 million valued firm looked like it was nearing the Unicorn status. Now, as per the new information, the conclusion of its aspired round might not take it close to achieving that title in near future.

How Cars24 plans on finding its way out of this pickle and bring deep-pocketed as well as long sighted backers on its board, would be interesting to be observed in the coming months.