Startups often claim that they are close to achieving profitability despite knowing that doing so is some time away. Many scaled startups in India have been assuaging the media with claims of nearing profitability and going public.
On such a company is Droom. The Gurugram-based managed marketplace for used cars and bikes has been going gaga about nearing profitability since 2017 but it’s still far from turning profitable.
According to Droom’s annual statement filed with the MCA, its expenses recorded 75% growth to Rs 274.4 crore in FY19.In comparison, the total expenses during FY18 stood at Rs 157.38 crore.
The surge in expenses in the quest for scale blew up the losses during FY19 by 73.8% to Rs 128.55 crore from Rs 73.97 crore in the preceding fiscal. To fuel rising expenses, Droom’s Indian entity received Rs 82.21 crore from Singapore based parent Droom Pte during FY19.
The revenue from operations shows a year-on-year jump of 103%, growing to Rs 136.43 crore in FY19 from Rs 67.27 crore in FY18. Importantly, about one-fourth of this revenue, Rs 33.62 crore, were earned by providing advertising and tech support services to its Singapore based parent entity Droom Pte.
The wide gap between expenses and revenue hints that the company is nowhere close to turning profitable. Maybe in FY20, if it does some magic.
Besides operating revenue, the company earned Rs 9.43 crore through interest and gain from the sale of investments. Significantly, it sold mutual funds worth Rs 503.3 crore during the fiscal year ended in March 2019.
On the expenses front, Droom spent Rs 75.4 crore on employee benefits, a 2.85X leap from Rs 26.45 crore in FY19. This jump in employee expenses was majorly due to the buyback of ESOPs which amounted to around Rs 41.83 crores making up 55.5% of the total amount spent by the company on employee benefits.
While actual salaries to employees grew by only 34.3%, the directors’ remunerations witnessed a surge of around 2.34X apart from the reimbursement of their expenses.
The expenses on Ad and Promotion grew by 51.2% to Rs 182.52 crore in FY19 from Rs 120.75 crore in FY18 and these expenses made up 66.51% of the total expenses incurred by the company during FY19. The company ended up spending Rs 1.33 on Ad and Promotions to generate a single rupee of operational revenue. This is before the actual operating expenses of the company come into the picture.
Moreover, the company’s insurance broking arm Droom Tech Insurance also incurred a loss of Rs 3.22 lakhs. During the same period, the company invested Rs 2.3 crore in Droom Fintech and Rs 2 crore in Droom Logistics.
Looking at the financial health of Droom, it’s quite evident that the company would take at least a year from here to turn profitable. Meanwhile, Droom’s CEO and Founder Sandeep Aggarwal also claimed to go for an IPO in the US sometime next year. Looks like a steep task but if it does, it would be one of the fastest to go public from India