Jaipur-based Girnar Software Pvt. Ltd, which runs automotive classifieds portal Cardekho.com, is arguably the biggest non-metro startup in India. Its valuation has grown almost eight times in three-and-a-half years to around $380 million when it last raised money in March from Google Capital and Hillhouse Capital.
The company–founded by brothers and IIT Delhi alumni Amit and Anurag Jain–has recorded strong revenue growth, made a series of acquisitions, expanded overseas and diversified into multi-pronged businesses. In an interview with VCCircle, CEO Amit Jain shares the road map for the company and fundraising plans before going public by 2020-21. Excerpts:
You have raised around $94 million. How have you spent it so far?
A lot of money went into acquisitions. Some went into marketing. A good portion–less than 50%–is still in the bank. Our marketing budget is low–less than 10% of traffic is paid traffic.
We have made nine acquisitions so far. Not all the acquisitions were made in cash. Smaller ones are full-cash deals. Larger ones are part-cash and part-equity while some are all equity. We have spent millions in acquiring these companies. If we include equity value, it will be much larger. It will run into double-digit millions, but I cannot disclose the exact number. We have realised the value of these investments.
What do you plan to do with the remaining capital?
A lot of the remaining capital will be used to build our used-car business. A significant portion will be spent on building products and technology in the used-car sector. Brand building will also require some capital.
How is the used-car business shaping up?
It is picking up really well. We work with almost 3,000 used-car dealers in the country for listing their cars. Individuals can list their cars for free–anyone can call them and buy their cars. It is free–we don’t make money there and we don’t interfere in the transaction. But if you are an individual seller and want more visibility, you can pay us around Rs 1,500 and get a higher slot. It is our premium model for individuals. For deals, it’s a package offering–they can take a 10-car package, 20-car package and so on.
There are many startups coming up in the automotive business, aggregating car servicing, repair etc. Do you look into these segments as well?
I want some of them to grow. I cannot do everything myself. I need to maintain focus. I’ll get distracted if I do too many things. I have a clear focus; I’m sitting on a large opportunity.
Will you continue to make acquisitions?
I don’t plan acquisitions, they happen. If something nice comes up with a nice founding team, and if I feel they can add value to the existing business line, we will make a decision. It’s build versus buy decision. If you find the idea and the entrepreneurs, you need to buy them or invest in them rather than building something from the scratch–that is how I operate.
You made around Rs 49 crore revenue in 2014-15. How much did you grow in 2015-16?
We have grown almost 100%. Revenue is a little less than Rs 100 crore, it is around Rs 90 crore [in 2015-16].
What is your growth in terms of workforce?
We added many business lines including TyreDekho, TrucksDekho, BatteryDekho and BikeDekho in the past year. We have doubled our workforce to 2,100 on our rolls in the past year. This is besides the 300 people working for us in call centres, which we have outsourced.
Your last fundraising was from Google Capital in January 2016. What are your plans about the next round of fundraising?
No plans as of now. The markets are not good currently. We don’t need to worry about capital now. I have money for two-and-a-half years, even if we don’t increase revenue. We are obviously increasing revenue and so we will have more runway.
Currently, new-car business is profitable for us. Used cars is where we lose money, but that doesn’t mean we lose money because we give discounts. A lot of money is being invested in building the right technology.
What is your road map for growth?
In new cars, we are profitable on unit economics. In used cars, we will be profitable in two years. The rest of the time that is left, we will be preparing for an initial public offering and increasing the margin in the business. We are looking at 2020-21 ideally for the IPO. This is the road map that we have, although preparations are in the preliminary phase.
We (brothers Amit Jain and Anurag Jain) own a majority of the company. We want to give exits to investors through the IPO. We will have one more round of fundraise when the market is right, possibly in 2017-18. That will be the last round before the IPO.
Your rival Cartrade is also fairly well-funded and did a big acquisition. How is competition among car portals?
It is a two-player market now. We acquired Gaadi and ZigWheels and they acquired Carwale. It’s healthy competition. I like to have such competition. They went for a mega fundraise because they had to pay for the all-cash deal of Carwale acquisition. There is no scope left for a third player now. You will have to come up with at least $200 million to make it big in the industry now.
Some e-commerce players have got into online car sales. Do you also plan to get into this business?
We don’t do online car sales. Some e-commerce players are starting it now. But we don’t want to do that right away because they are suffering losses on each car or bike they sell as they give discounts. I don’t run a business until it makes business sense. The unit economics is very important. I’m a founder who doesn’t want to do a business where you make a loss of Rs 10,000 on a car to get a booking. I’m not a GMV (gross merchandise value) guy. If they do well, we might get in.
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