India’s mass transit systems, unreliable even before the coronavirus pandemic, were completely shut down when the country crashed. As a result, the Indians were quick to find an alternative means of transportation, and that often meant used cars.
One of the main beneficiaries was Cars24 Services Pvt., An online marketplace for used cars based in Gurgaon, India. The company’s valuation jumped to more than $ 1 billion after a new round of funding, Cars24 plans to announce on Tuesday. DST Global, the investment firm led by Russian-born billionaire Yuri Milner, invested $ 200 million in the deal.
The investment doubles the total funds raised by Cars24 since the company was established five years ago. CEO and Co-Founder Vikram Chopra was an investment analyst early in his career at Sequoia Capital, one of the world’s leading venture capital firms and now an investor in Cars24. Chopra founded Cars24 after having a difficult time selling his car before temporarily moving to the United States, he said. Frightened by the situation, he ended up giving his car to a friend, he said.
In the middle of this year, Cars24 sales increased 20% from pre-closing levels. That followed a few weeks in the spring when the site did not generate revenue of any kind. At first, Chopra thought the numbers reflected pent-up demand that would be short-lived, but said sustained high levels of traffic to the site suggest otherwise. Cars24, which takes a portion of each transaction, is on track to generate estimated annual gross revenue of $ 600 million, Chopra said. “Our awareness among consumers has exploded dramatically,” he said.
India’s used vehicle market is fragmented and dominated by family operations. Online retailers like Cars24, Droom and OLX, along with the automakers themselves, offer a more consistent shopping experience, simplified paperwork, and access to lenders. India lacks a system to establish fair values for used cars like Kelley Blue Book, making the process more complicated and opaque.
As the pandemic progresses, trains and buses in Bangalore, Delhi and Mumbai have resumed service, but fear of contracting the virus keeps many travelers away. Coronavirus cases in India exceeded 9 million; infections are increasing; and several cities are contemplating new closures.
For Cars24, the new investor brings, as his name implies, a global experience. DST Global is based in Hong Kong and has supported a diverse list of companies over the years, including Facebook Inc. and WhatsApp in the US and Alibaba Group Holding Ltd. in China. In India, DST invested in online shopping company Flipkart, which sold an 80% stake to Walmart Inc. two years ago in a transaction that valued the startup at approximately $ 20 billion, and raised awareness of the company on the challenges surrounding online markets in India.
What made Cars24 stand out was its ability to handle so many steps, including remote vehicle inspections, said Rahul Mehta, Dubai-based managing partner at DST. “You have to be very involved in operations,” he said. “These guys have done well.”
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