Under the hood: Droom’s financial performance during FY18-FY20

Online used car marketplace Droom had recently checked into the unicorn club after announcing its $200 million pre-IPO round. By the numbers, it was the 17th unicorn in 2021 (this year India has minted 35 unicorns so far). However, Droom’s Singapore-based holding entity’s most vital number: operating income in FY19 and FY20 are underwhelming, to say the least.

Its financial performances in the above two fiscals seem akin to a growth stage company rather than a pre-IPO venture. During FY18, Droom recorded operating revenue of $8.07 million which dropped 90% to only $832,000 during FY19, as its filings show. While Droom’s revenue recovered next year and grew by 109.2% to $1.74 million in FY20, the gap with FY18 is still huge.

Importantly, due to changes in financial reporting standards revenue figures for both FY19 and FY20 are net of discounts provided by the company to customers, hence the low number. Droom provided discounts worth $13.9 million and $20.24 million during FY19 and FY20 respectively and aggregate gross collections stood at $44.8 million for the three year period. 

The company also collected other income (from advertisements) of $148K, $218K and $273.7K during FY18, FY19 and FY20 respectively.

Droom has confirmed the above figures to Entrackr and cited changes in financial reporting standards in Singapore as a reason for the seemingly low collections. However, according to filings, its gross revenue figures (even without deducting discounts) haven’t crossed $22 million during FY18-FY20.

According to filings with the RoC in India, the company’s mainstay Indian operations recorded operating revenues of $11.92 million, $20.87 million and $25.64 million during FY18, FY19 and FY20 respectively.

Droom’s complete income breakdown on the infographic can be seen below:

Sandeep Aggarwal-led Droom Pte controls six subsidiaries operating in India, Malaysia, Thailand, Singapore and the USA. Besides its core business of used car marketplaces, these subsidiaries provide services like Roadside Assistance services (RSA), auto finance & insurance buying.

Droom splurged $43 Mn on marketing during the FY18-20 period

Moving over to the expense sheet, marketing costs remain the largest cost centre for the company across the three fiscals: FY18, FY19 and FY20. This cost amounted to $20.24 million during FY18, reducing by 24% to $15.4 million during FY19. In FY20, marketing expenditure dropped further by 50% YoY to $7.73 million and accounted for 27.2% of the total annual costs.

Employee benefit expenses incurred by the company surged over 4X from $4.1 million in FY18 to $16.7 million during FY19 primarily due to share-based payments (ESOP) worth $11.85 million to employees. These expenses dropped by 64% to $6.03 million, accounting for 21.2% of annual costs during FY20.

Large finance cost of $86 Mn during FY18-FY20 for Droom

As per Singapore’s financial reporting standards (SFRS) convertible preference shares (used by ventures to raise money) are treated as liabilities instead of equity instruments and fair value changes in these derivative liabilities are considered as expenses. 

Hence, Droom’s income statements list large finance costs amounting to $30.02 million, $44.42 million and $11.74 million during FY18, FY19, and FY20 respectively which are recorded due to SFRS requirements.

We could observe an overall reduction in Droom’s scale of operations as represented by the company’s collections and annual expenses. Annual expenditure contracted by 64.6% YoY from $80.5 million to around $28.46 million during the pre-pandemic fiscal of FY20.

Droom lost close to $150 Mn during FY18-FY20

With the reduction of cash burn, the company has managed to cut back on annual losses which dropped 67.3% YoY to $25.5 million in FY20. Droom’s losses had grown by 72.4% to $78.1 million during FY19 from $45.3 million in FY18. During these three fiscals, the company recorded aggregate net cash outflows from operations amounting to $57 million.

The seven-year-old company’s balance sheet sported accumulated losses of $230.131 million(including finance costs) as of 31st March 2020.  

While Droom is yet to file its annual financial statement for FY21, in its statement during the last fundraise, the company had projected net revenue of $65 million in the current calendar year (CY2021). Droom has claimed to reach the milestone for 400K vehicles sold on its platform 4 weeks back, and also claims to have served over 1.5 million customers in total with its various services. At a claimed 12,000 vehicles sales every month it does seem to be promising a strong recovery yet again, but it remains to be seen what it finally delivers, considering the disappointing numbers of the preceding two years.