As IPO plans rev up, used-car platforms like Spinny, Cars24, and CarDekho face profitability roadblocks amid regulatory friction, rising costs, and evolving customer expectations.
Spinny’s Numbers Shift Gears Ahead of IPO
Spinny has trimmed its FY25 losses by 28% to INR 424 Cr, while revenues surged 25% to INR 4,657 Cr, signaling stronger operational discipline.
- This is the second consecutive year Spinny has narrowed losses, showing maturity in an asset-heavy, capital-intensive business.
- Revenue growth outpaced expense increases, aided by cost optimisation, particularly in marketing and employee costs, which dropped by 71% and 13%, respectively.
The full-stack platform, which owns and refurbishes its cars, positions itself as a trust-first brand, differentiating from asset-light peers.
Inventory-Heavy Model: A Double-Edged Sword
Spinny’s strategy of controlling the vehicle journey – from purchase to resale – helps build buyer trust but inflates costs:
- Procurement costs alone stood at INR 4,304 Cr in FY25, about 80% of total expenses.
- High refurbishment and re-registration costs remain a drag on profitability.
- The company faces growing challenges like E20 fuel compliance, potentially reducing resale value of older stock and impacting margins.
Yet, Spinny has leveraged digital channels, drawing 77% of customers online while expanding offerings such as warranties and financing to improve gross margins.
Rivals Take Divergent Roads
India’s used-car ecosystem now resembles a four-way race, with divergent business models and IPO ambitions:
- Cars24
- Revenue: INR 6,917 Cr in FY24 (higher than Spinny)
- Losses rose to INR 498 Cr (up 7%)
- Expansion to UAE and Australia adds scale but increases burn
- Full-stack model similar to Spinny, but lacking cost discipline
- CarDekho
- Revenue: INR 2,074 Cr in FY24, up 54%
- Losses: INR 340 Cr (down 40%)
- Focus on tech-led classifieds and financing
- Claims standalone profitability, but scale is smaller
- CarTrade Tech
- Revenue: INR 711 Cr in FY25
- Profit: INR 145 Cr (6x jump YoY)
- Asset-light model ensures margins, but limited growth and customer control
Each model comes with trade-offs: inventory-led platforms promise deeper customer engagement and brand control but suffer margin stress, while marketplaces offer scalability with limited control over quality and fulfillment.
Industry-Level Headwinds Remain
India’s used-car market surpassed new car sales in FY25, with 5.5 Mn pre-owned units sold, vs. 4.6 Mn new vehicles. Yet, the road to profitability remains rough:
- Unorganised players control ~70% of the market, limiting formal sector scalability.
- Refurbishment, logistics, and paperwork, especially around RTO registrations, increase turnaround times and costs.
- Deemed ownership rules (2023) introduced liability risks for delayed ownership transfers, affecting both full-stack and marketplace models.
- E20 compliance, starting 2026, threatens margins for older, non-compliant stock, particularly for inventory-heavy platforms.
The Investor’s Dilemma: Scale vs Sustainability
Spinny and peers are expected to raise over $1 Bn via IPOs by end-2025 or early-2026. Their public float success depends on:
- Cost management discipline
- Scalability of digital channels and ancillary services
- Ability to mitigate fuel compliance risks and regulatory delays
Spinny’s comprehensive control of car quality, financing, and customer experience may warrant premium valuations, but its high working capital needs and exposure to compliance issues remain investor concerns.
Meanwhile, asset-light platforms like CarDekho offer lean operations and promising fintech-led growth, though scaling revenues remains a bottleneck.
A Market on the Cusp
The used-car sector is evolving fast, backed by rising digital adoption and a growing middle class. However:
- Growth is expected to moderate to 8-9% in FY26, per Crisil Ratings, from 10% earlier.
- Success will depend on platforms delivering trust at scale, managing unit economics, and adapting to regulatory frameworks.
The market is ready — but only those who balance operational efficiency with consumer trust and compliance foresight will thrive post-IPO.
