Around mid-2019 the Indian used car market was valued around $24.24 billion and was expected to grow at a CAGR of 15.12 % between 2020-25 but the COVID-19 pandemic put a dent in that forecast.
The organised players in the used car market such as Mahindra First Choice, Maruti True value along with internet companies including CarDekho, Olx and Cars24 made up 18% of the total market and have benefitted from the upsurge in sales of used vehicles as new car sales have dropped in the last two fiscals.
One such player, Cars24, has achieved around 82% growth in its topline during the last fiscal which surged from Rs 1,687.8 crore in FY19 to earnings of a little over Rs 3,065.23 crore during FY20.
Nearly 96.8% of the income was generated through the sale of used cars, which grew by 80% to Rs 2,966.11 crore in FY20. Another Rs 22.03 crore was earned through ancillary services including car delivery charges and parking fee as these collections grew 5.4X during FY20
Used car sales companies have achieved improved sales conversion rate and customer engagement through the provision of captive financing to their customers. The Gurugram based company also introduced its own financing plans in the previous fiscal to boost sales and earned Rs 10 crore from these financial services and interest on loans during FY20
Cars24’s primary expenditure was the purchase of stock of used cars which amounted to Rs 2,865.43 crore in FY20, growing by 76.5% from purchases of Rs 1,624 crore made in FY19. On similar lines, employee benefits related costs also jumped by 51.5% from Rs 143.4 crore in FY19 to Rs 217.2 crore spent in FY20.
The expense sheet also reveals that the company has cut down its advertising expenses by 23.6%, from Rs 185.5 crore in FY19 to Rs 141.64 crore in FY20. Expenditure related to both IT & Customer care and office manpower has doubled to Rs 40.8 crore and Rs 23.8 crore respectively.
Another Rs 39.5 crore were spent on rent and power and pushed the total expenditure to Rs 3,350 crore in FY20, registering a 66.4% leap from Rs 2,013.5 crore spent in total during FY19.
Cars24 management spent Rs 1.11 to earn a single rupee of operating revenues in FY20 while its net cash outflow from operations increased marginally to Rs 362.7 crore in FY20.
With an 82% increase in collections, while controlling the growth of operating costs, the company has managed to bring down its annual losses by 12.5% from Rs 325.7 crore in FY19 to Rs 285 crore lost in the fiscal ended in March 2020. EBITDA margins have also improved by 1200 BPS from -18.92% in Fy19 to -6.92% in FY20.
To fund its operations during FY20 the company had raised Rs 735.42 crore through allotment of shares and borrowed another Rs 45 crore. Cars24 has recently entered the club of unicorns with a $200 million worth Series E round led by DST Global. Existing backer Exor Seeds, Moore Strategic Ventures and Unbound also participated in the latest round earlier in November 2020.