Gurugram-based unicorn Cars24 saw its topline grow at a lower pace in the year ended March 31 as demand for used cars entered the slow lane, and the company cut down on its spending significantly.
In FY23, the startup’s operating revenue grew 7.7% year-on-year to INR 5,535 crore. Compared to this, in FY22, the company’s revenue from operations had posted an on-year growth of 87% to INR 5,136.5 crore.
The company’s net loss for FY23 came in at INR 467.7 crore, up from INR 248.1 crore in FY22. However, in the year ended March 31, 2022, it had reported a one-time gain of INR 845 crore in other income on account of technology transfer to its Singapore entity. Excluding the one-time gain, the company’s operational loss in FY22 stood at INR 1,093.1 crore.
“The focus during the year was on rationalising costs…and directionally I can tell you we have continued on the path of growing sustainably even in FY24. The idea is to build in a healthy way and reduce the loss margins,” Gajendra Jangid, cofounder and chief marketing officer, Cars24, told ET in an interaction.
From a peak cash burn rate of around USD 20 million in 2021, the company had reduced it to around USD 8 million earlier this year, and Jangid said the number was reduced even further.
Without disclosing numbers for the ongoing fiscal, he added that in the first half of FY24, the company’s topline has grown 30% over the April-September period of FY23.
The SoftBank and Alpha Wave Global-backed company also curtailed its expansion plans during the year, both on the domestic front and internationally. In addition to India, Cars24 operates in the UAE, Thailand and Australia. Earlier this year, it shut down operations in Saudi Arabia and Indonesia.
Within India too, Jangid said, the company was doing a calibrated expansion of its consumer-to-business (C2B) vertical, and has increased presence to 150 cities now from around 100 earlier this year. It has stopped expanding in newer cities in its business-to-consumer (B2C) vertical.
“Our focus was to increase market share in existing cities and get a sustainable growth in each of those,” Jangid said.
In the C2B business, the company facilitates purchase of cars by used-car dealers by individuals selling their products, while in B2C the company operates as a marketplace for purchase of cars by end consumers.
Notably, listed used-car company CarTrade Tech, which acquired the Olx India business from Prosus earlier this year, recently announced the shutting down of the C2B vertical citing poor unit economics in the business.
In May, ET reported that companies in the space were rationalising operations as sales of used cars became sluggish after heating up in 2020 and 2021.
Dual efforts
Cars24, which competes with companies such as Tiger Global-backed Spinny, CarTrade Tech and Peak XV Partners-backed CarDekho, is focussing on two levers to improve its margins, Jangid explained.
“On the one hand, we are looking to provide value-added services to our consumers such as insurance, additional warranties and loans, which is adding to our margins. On the other, we are also working on reducing operational expenses such as marketing and advertising spends, staff costs, etc,” he said. Cars24 had launched its lending business after getting a non-banking finance company (NBFC) licence in 2019. As of May this year, the company has disbursed loans worth INR 2,000 crore. While the lending firm, Cars24 Financial Services Ltd, is currently focussed on enabling loans for customers of its parent company, it might soon begin targeting external used-car buyers.
In FY23, the company’s advertising and promotional expenses stood at INR 167.3 crore, down 26% on year. It also cut down on employee benefit expenses to INR 478.3 crore last fiscal from INR 548.5 crore in FY22.
As a result of this, Cars24’s gross margins improved to 11% in FY23 from 3% in FY22, while its earnings before interest, taxes, depreciation and amortisation (EBITDA) margins improved from -19% to -3%.
“By solving for process efficiency, automation and implementing these changes across the organisation, we’ve achieved substantial cost reductions. These cost savings, in turn, have allowed us to reallocate resources to areas such as technology development, ensuring we’re well-positioned for the long-term,” Jangid added.
Last year, ET had reported that Cars24 took a call to prioritise sustainability over business growth at a time when late-stage funding deals began drying up. At the time, the company had shut most of its offline centres across the country, except in the national capital region (NCR). In 2021, the company had raised almost USD 650 million in equity funding. Its last equity round was in December 2021, when it raised USD 329 million at a valuation of USD 3.2 billion.
It had also laid off 600-700 people during the year, but its overall headcount reduced by a higher quantum as the company stopped replacing employees it lost to attrition during 2022.
