India’s mass transit systems, unreliable even before the coronavirus pandemic, were shut off completely when the country locked down. As a result, Indians rushed to find alternative transportation, and that often meant used cars.
A major beneficiary 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 Tuesday. DST Global, the investment firm led by Russia-born billionaire Yuri Milner, invested $200 million in the deal.
The investment doubles the total funds raised by Cars24 since the business was established five years ago. The chief executive officer and co-founder, Vikram Chopra, was an investment analyst early in his career at Sequoia Capital, one of the world’s most prominent venture capital firms and now a Cars24 investor. Chopra started Cars24 after having a hard time selling his car before a temporary move to the U.S., he said. Daunted by the situation, he ended up giving his car to a friend instead, he said.
By the middle of this year, Cars24 saw sales rise 20% from pre-lockdown levels. That followed some weeks in the spring when the site generated no revenue whatsoever. 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 cut of each transaction, is on track to generate estimated gross annual revenue of $600 million, Chopra said. “Our awareness among consumers has shot up dramatically,” he said.
India’s pre-owned vehicle market is fragmented and dominated by mom-and-pop operations. Online retailers like Cars24, Droom and OLX, along with the automakers themselves, offer a more consistent buying 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 drags on, trains and buses in Bangalore, Delhi and Mumbai have resumed service, but fear of contracting the virus is keeping many commuters away. Coronavirus cases in India surpassed 9 million; infections are soaring; and multiple cities are contemplating further lockdowns.
For Cars24, the new investor brings, as its name implies, a global expertise. DST Global is based in Hong Kong and has backed a varied list of companies over the years, including Facebook Inc. and WhatsApp in the U.S. and Alibaba Group Holding Ltd. in China. In India, DST invested in the online shopping company Flipkart, which sold an 80% stake to Walmart Inc. two years ago in a transaction that valued the startup at about $20 billion, and built up the firm’s awareness of the challenges around online marketplaces in India.
What made Cars24 stand out was its ability to handle so many steps, including remote inspections of vehicles, said Rahul Mehta, a Dubai-based managing partner at DST. “You have to be deep into operations,” he said. “These guys have done well.”