Redefining car ownership | PumPumPum

This episode dives into the fascinating world of corporate car leasing, where companies turn cars into assets, leasing them to employees and making interest disappear like magic with monthly subscriptions!

When a company gives a car to an employee, it is leasing the car as an asset and paying a monthly subscription for it to a corporate leasing company.

The corporate leasing company is essentially lending money in the form of a car and earning interest on the loan in the form of a monthly subscription.

Corporate leasing is a fairly well-established business because for an employee it is a very tax-efficient option to opt for a corporate leased car, but this never really took off in India.

Gurgaon-based startup, PumPumPum is building up a car leasing business for India. They have reimagined the traditional leasing model, making crucial tweaks to find a product-market fit at scale.

Tarun Lawadia and Sameer Kalra talk about the importance of perfect timing and utilizing technology as an enabler in an operation-heavy business!

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Additional readings:-

1.How PumPumPum is making used-car rentals hassle-free for users

2.Pumpumpum bets big on leased vehicles

3.Used-car leasing firm PumPumPum raises $2 mn in equity funding

4.PumPumPum: India's first Used Car Leasing platform

Read the text version of the episode below:-

Sameer: Hello everyone, I'm Sameer Kalra. I'm the co-founder for PumPumPum. 

Tarun: Hi everyone. Myself, Tarun. I'm founder, CEO of PumPumPum.

 I started exploring finance industry. So I found interest around the trading ecosystem, how this stock market and global ecosystem, what are the main factors, how these things play, behave.

And I found a good interest. So I think in my third year of my college, I participated a competition around a virtual trading conducted by one of the, I think India's uh, leading prop trading firm, future First. So they conducted a trade kinda competition. So I got selected in top 50 and I received a replacement offer from that company.

So after completing my graduation, I joined Future First as a fixed income trader, used to trade fixed income market, mainly in the US and European region. So during my college time also, I was sort of involved in couple of startups wanted to create some, basic problem statement and wanted to create some solution for the consumer for some B2B basis.

So I think that there some angle of startup was there in my mind, trading was also quite a startup kinda experience because you are solely responsible for your personal PNA. So I spent two years I actually came from a, like a poor middle class background family. So basically money was some first angle that I wanted to clear out. In terms of my personal loans, my father debt and those. So I think two years that gave me a good opportunity to, sort of, become stable and do something on my own. And that was the time I, I was sort of confident to take a risk. So 13 I joined Chaayos as their founding team member. Chaayos was very early.

Couple of only outlets Chaayos, I just opted cause of my, some personal interest in food beverage was like I'm enthusiast uh, around cooking and those kinda things. So I joined Chaayos knew nothing apart from what kinda work I'm getting into.

Founder who Nitin Saluja. So he is like, yeah, okay. you can go for the operations kind of background, which always need a person where you can manage a lot of people. People background could be from down labor kind of people to very senior people.

So that's how I got myself into the operational background. So during my days, I was responsible for setting up up their outlet, supply chain, basic operations in store operations kitchen to supply chain, those kind of thing, I think after one and a half year, my major understanding that I wanted to gain from the Chaayos is to learn, how to scale a business, how to start a company, how this startup ecosystem behaves how do you raise money and those kind of things. So, after one and a half year we raise money from Tierglobal. So I was confident enough to move on and to start something on my own. So 2015 I co-founded a company called PlussApp.com, which was into online, online medicine delivery space.

We raised a million dollar, we expanded our operations Delhi, Hyderabad and NCR and it was more of a hyper local play where we enabled all the retail pharmacy stores and created a, created a supply chain where end user can deliver medicine within like 30 minutes. So that was our initial idea. I think 2015, we got ourself into the same market ship where people from GMV started questioning about GMV approach and focusing more on the profitability and economics.

So for us to pivot to scale our business with a new approach needed some good amount of funds, I think that is where then we explored options of uh, merger. So we received options from couple of industry leader and we got acquired by Netmeds. So we sold our company to Netmeds. 

Akshay: How is Netmeds model different from your model?

Tarun: Yeah, so Netmeds was initially delivering their entire medicine from single warehouse. That was, that was 

Akshay: So they were like inventory led model. 

Tarun: Yeah, they were inventory led and against their competition, which were like FarmEasy and OneMG, which were more of quick delivery play. So I think Netmeds was struggling to deliver same day delivery in lots of major metro cities.

Akshay: And the FarmEasy and OneMG are they also inventory led or like..

Tarun: So OneMg that point of time was a mix, I think a mix of inventory plus a partnership model. Farm Easy was purely so basically Farm Easy started a more backward integration where they initially onboard a lot of retailers and wholesalers, and they also created a forward play where they a lot of, pharmacy and they used to deliver their medicine from those channel, but they used to resell their inventory, whatever they consumed. And they used to give them some incentive I think that was a very good model, I think Netmeds was pure inverntory led model delivering pan India from single warehouse. So we created a pure inventory led play only at Netmeds, but we created a hub and scope model. So we created a lot of warehouses. So we created two other warehouses, one was in Chennai and another in Delhi and then we created sub, sub small warehouses, in Hyderabad, Bangalore, Mumbai, Kolkatta.. Those areas so that all the metro cities can get their medicine deliver on the same day. And the remaining areas can be fulfilled at least in two to three days. 

Akshay: Do you think you took a wrong call of being an aggregator instead of owning the inventory like you are essentially your bottle was aggregator, right? Like you were. 

Tarun: So when we started, we used to share the same for working place, so growers founded by another . So Salk, so we used to share, four of us used to says the Growers team. so Growers was one of our initial B2B partner. Then their model of this hyper local plate and relieving groceries through their approach. And they received a good amount of funding. So the was hyperlocal something at that point time..

Akshay: Flavor of the season. 

Tarun: Exactly. So, basically, and when I was exploring new ideas, so my other co-founder, so they were into, they were like, ok, medicine is something which gives a good angle and online pharmacy something, again, lot of people are putting their money. And I saw the, hyperloop and how growers.

I said, why not apply the hyperlocal thesis on the pharmaceuticals? And that gave us immediate funding. So this entire thing along with our team, everything we received, I think couple month, we received first million dollar funding. So I think immediatley the suddently 2015 sentiment shifted from the, those MA approach to profitability, I think we got stuck in that phase and eventually for setting up an inventory led model.

Akshay: And yeah. So, and at Netmeds you were largely like in a COO kind of a role, I guess, like looking at operational efficiency. 

Tarun: Yes. So OP I was responsible for operation and supply chain at Netmeds. So my initial role, I almost spent a year at Netmeds majorly to set up their entire supply chain. So I set up warehouses across different, different cities enabling new supply chain efficiencies, which can bring that competitive edge along with their competitors.

So I think after one year my media job was done, and then again, I wanted to explore. So I learned a lot of things from understanding or being into the operational background. So I've always taken up those kinda challenges where to create something you need to be strong on the operational front, the technology becomes enabler.

So my, my background comes from that angle. So I was not a tech oriented, kinda a founder. I, wanted to explore those kinda problem which people are not able to solve just by technology. And there, there lot of operational bandwidth, operational efficiencies required. So after Netmeds I joined a startup studio called T9L Entrepreneur In Residence to provide consulting support to some of their portfolio companies in healthcare space in food tech space.

But mainly buying some time for myself to explore new business ideas. So I think that was initial, initial used car was never in my mind because my, my understanding of used car is that point was here lot of people are already into the use car market. There are old car players like Carniche Mahindra, TATA.

So I was working that point of time more in the organic farming space. My idea that point of time I was working more interested in the organic farming is again where the technology is one angle, but the operational challenge was there in the farming or the agricultural ecosystem. And I wanted to build a organic layer which creates a D 2C brand play of organic goods, which can be directly delivered to the end user.

So that was the idea of working, I think used car as a problem came very interesting naturally to me and also made a good sense to my entire personality, entire that I found base. One of my friend over there at was looking to buy luxury car that point of time, and I was in the car. That car you can easily buy from any, there are a lot of marketplace, there are a lot of spiny was there at that point of time.

Cars24 was also there, a OLX. So I get buying a car should not be a problem, but I found lot of challenges, issues even. But I was personally, when I was helping my friend to buy a car, I found key luxury of value of a 20 to 25 Lakhs and nobody's giving me any kind of warranty. The luxury car at that point of time nobody was addressing.

And even someone who's willing to spend laksh rupees a outcome was very, very not supporting from the consumer perspective, the warranties not, financing on luxury car no one is going to fund on luxury cars.

And then what confidence you are getting into a 20 25 laksh transaction and maybe after one. Car can give you lot of trouble. So that was the idea. And then it, it was a surprise to making, why there are no options, which gives me a single platform to own a car without worrying about all the hassle. I'm ready to pay, spend big amount.

So that was the initial problem. And then I started researching about the used car ecosystem. And I, it met the same criteria. A lot of people invested a lot of lot on the technology like car trade, all these technology, but the, the outcome from a consumer perspective was not there. Terms of warranties in terms of hassle free ownership in terms of financing, a user is purely relying on his own or the dealer partner who help him figure out a car. Maybe you organize till date. They, they're more a discovery platform. So they'll, they'll give you car with six months, then they'll help you get a finance from the banks. But banks are not in their control. Banks decide which car they want fund, which car they don't wanna fund, what is the lTV? Everything as the bank understanding after two or three year, when you are done with the car, then again reselling, you have to go out C2C platform or OLX, cars24. You sell your car. So if you look at from a user journey, the, the entire responsibility of car management, maintenance, all the risk associated with the car remains with the user only. So that was the idea I, I found. And then I thought here, the 1 big observation that we identified in the used car, that the average ownership of a used car is reducing.

The, currently the average ownership is only two year and you got it's four year. So our clear, the ownership is only two year. Then why should a person buy a car? I should technically own a car for two years. Someone should, someone else should take care of everything in terms of car quality, service maintenance, purchase financing.

That was the idea. And then I got to know the leasing the leasing plate. And then we found in India, there are a lot of leasing companies, but they're only limited to new. And that, that, again, gave me a surprising nobody's looking at a used car. And then we founded all the leasing companies, majorly globally owned companies.

So they come with their global vendor, global, and they have a fixed proposition, leasing only b2b, limited to top blue chip companies at all. So that was the initial thesis I found. So I started PumPumPum in mid 2018 initially with the idea of creating a subscription around the used car and first concept, concept level, understanding.

We wanted to create something where the end user can simply get the car delivered. So we wanted to do a POC. So we took a debt family, friends 0 25 lakhs, then I took some debt from the bank, and then I think we delivered some 20 cars. And then I was confident enough, ok this model has clearcut validation and clearcut demand from the user perspective.

And mid 19, we full-fledged rule out the PumPumPum subscription plate. I think December 19 I think once we secured the first round of funding. 

Akshay: Okay. Wait, let's get Sameer into the story first. We were by this time..

Tarun: Exactly, so December 19 is where I met the Sameer actually. So then yeah. So Sameer, please. 

Akshay: So, one request to Tarun, your phone is ringing. So if you can yes, yes. Sameer. Yeah. Tell me your origin story here. 

Sameer: Yeah, so I've been born and brought up into a simple Punjabi joint family in Delhi. Typical 1975 is the model that I am. So, it was simple.

Punjabi family, a joint family everybody was into service. Never anybody had ventured out into business. So I went to a school called Springdale uh, which is in, Delhi did my schooling from there, went on to do my graduation from Delhi University in Economics. So I'm an economics graduate from Delhi University.

I did my MBA for Simple Lifestyle, started working way back in 1999. Initially seven to eight years were in training and consulting. So I worked with companies like HeroMindMine, which is part of the hero group, but get into training and consulting and not typical, manufacturing as, as the hero group is known for.

Then worked for a company called NIT, because at that point in time computerization was the mainstay, right? Everybody was wanting to get into computers, so, know, kind of did some, and I've always been into sales, right? So 2007 onwards, I, I joined the auto lease industry. And since then have stuck to that industry.

So I happened to work with the world's largest leasing company, which is lease plan in various capacities for eight and a half years. As said, leasing has been prevalent in India for nine since 1999. However, still in 2007, the back, the challenges were huge. I mean, people never understood what leasing is all about.

So either people knew an outright purchase of a car or they knew taking a bank loan. There was never a third way of owning a car. So leasing was something which was very new. The few challenges which we faced initially to actually, train the market or to educate the market about what leasing is all about.

So we did that around 2015 I moved on to a company called AVIS. AVIS is part of the, a BG group globally, US, which is in almost 160 countries and in almost 55 to 60 countries. They also run an auto lease portfolio. So I was heading that as part of the management team. That kind of made my understanding very strong around the leasing thesis because, I got to know the 360 degree view of how the business looks like, both from the operation side, finance side, sales side structuring and, and various things that are required to build a business around that.

That was in around three, three and a half years. Then moved to a company called Clicks Capital. Clicks Capital is an earth rile company of GE, it's Earth GE Capital promote by Pramod Bhasin and Anil Chawla, both founders. So there I was part of the organization as vice President for Automobile business looking after used Car Leasing and used car loans 

Akshay: So you're saying that car leasing already existed? 

Sameer: No. So it was used car loans and, and new car lease. Told you most of the organizations are only stuck to new cars. 

Akshay: Only we took corporates, right? I don't think as an individual I can get a car.

Sameer: Absolutely. It was a b2b, however, However used car loan was more to the individuals. It was in the retail, but uh, corporate was the way that auto leases were sold in this country. 2019 college mid-age crisis. I had completed 20 years working, always wanted to do something on my own. And because of my last experience, knew nothing apart from auto lease.

So my last 12, 13 years during that time were already spent in that, and I was very sure to start something in that region. That is where I left my job, started consulting few people. So I've consulted for a couple of projects. I consulted Rev they're into car subscription, just like Zoom Cars happened to consult them for some time.

And that is when I am the roommate. The idea was astounding because all this while that I've spent in this industry, people have been asking this question that why, why can't you provide me a used cars instead of a new car? If I so desire, and if you also look at it Akshay, the market for use car is almost 1.5 times the market of new cars in terms of number of units.

Yet there has been not a solution to provide this. And, Tharun and I discussed this at length. He already had a few cars, which he's already done. There was already proof of concept. I wanted to start something on this own, and that is how we got together. And I always had a flare for only growth.

Looking at various partnerships. Tarun had his hands strong in operations. So I think it went out to be a perfect combination for both of us to, really build PumPumPum. 

Akshay: why is cars leasing offered only to corporates? is it that the underwriting for individuals is difficult and hence 

Sameer: It's only underwriting criteria. All the leasing companies that you've seen today all large games have their global headquarters. They are very risk averse. I mean, they would want to not go into the retail market. That's one. But having said that, Akshay, even if you look at the retail sector, despite having a huge demand for new cars, leasing rate doesn't work. Because see, leasing thrives in a situation when there is a risk of ownership in a new car, typically there is no risk of ownership. So, banks will give you loans, happily.

Akshay: Risk of ownership. What is that?

Sameer: Risk of ownership is when you are not clear in terms of what am I going to spend on the journey of this car, right?

So if you take a new car today, all the OEMs are giving you back-to-back warranties. Banks are giving you a hundred percent funding. Most of the OEMs are also giving you a buyback guarantee, which means whatever was supposed to be a risk on ownership OEMs are already doing why people chose corporate route is because there is an additional benefit of tax.

So it is tax friendly. So it went through the corporate route and it was from the underwriting criteria. Very good for these leasing companies. But used car was very different. There was a real risk of ownership. It's like a black hole. So we always say buying a used car up until PumPumPum came was like walking into a hospital without health insurance.

So it, it can go either ways, right? So you can buy a good car, you may not buy a good car. So it's a risk. So that is the fit very well fit. 

Akshay: So, what was the the model, like how did you price it? Like you did a pilot so maybe you bought a used car for 10 L and how did you price it on a monthly basis? What was the, I mean, just, just tell me about that, like the details of that pilot. 

Tarun: Pilot was very simple. So we did a very simple initial custom. Some customers who, who were interested in the idea. So they were, they were very simple approach. Let's say if I buy a car of 5 Laksh rupees after two year, the market, I'll be able to, let's say 2.5 laksh of the same car after two years.

So they know okay 2.5 Laksh is the deposition for that I have to pay for the car. And then obviously for, let's say the duration, two year, you'll do a two insurance, annual insurance bases on kilometer every understanding for one year, which is around 10 15,000 Km, so, there is is going to be a 3 schedule surveys basic. So we, we factored in those simple, simple cost and the depreciation cost along with the interest component.

Ok. For example, you take a loan on a 5 Laksh then obviously you'll pay interest total 5 Laksh amount here we are saying you'll, the principle is going to be a 2.5 and the interest component. So putting up all these costs together that was a simple approach for the customer and for the retail we used to give you a cost comparison there is going to be a 10% cheaper when they opt for a subscription leasing. Because of our, our involvement, we bring the economies of scale into the play. Whatever cost that a customer is individually is going to pay, our cost is going be lower, you take it from the procurement. If you're buying a car as individual, obviously at scale buy the same car. It's like slightly lower price. The service maintenance is gonna be lower. The the financing is gonna be lower. So we make our money outta those margin that we create and we pass on the benefits to the user also. So the user, technically it's a cost effective and without any risk associated. 

Akshay: What is the product for a user? He gets monthly, like, like all maintenance is your headache. What about fuel and all? Just describe the product. Who pays for fuel, who pays for maintenance and like, uh, just.. 

Sameer: So actually entire lease rental that we are talking about monthly, EMI covers your insurance for the entire tenure. It covers your maintenance tires, batteries, scheduled maintenance, unscheduled maintenance.

It also covers certain value added services, like, pick up and drop, which means whenever you want to send your car for service, our shopper will go pick up the car and drop it back. So these are the value added services, which are all bundled. All you need to do is fuel it according to your mileage and, and drive it.

So as they say, fill it, shut it, forget it. It's typically that model wherein apart from fuel, because it is dependent on its usage which is also obviously designed upfront. That is how the pricing is device. However, the fueling and rest, everything is left to us to take care of. 

Tarun: In our costing, we always factor in the costing from average. So obviously there are some cases, a 10 to 20% are going be some rash driver, there are going be some those kinda driver, but we have a very clearcut varient policy like in terms of users policy. So you can't use these cars in, in like, rallies or some, some adventure, those kinda thing. So the end use case is defined. 

Akshay: Does a good driver and a bad driver pay the same because the maintenance cost would differ according to quality of driving. 

Tarun: So generally the, users are defined in the contract. For example, you wanna take a year, 15,000 KM. Now there is, there is a guidelines of vechicle usage. So for example, what is covered, so is like minor scratches or regular users are technically covered in, in all this scenario, but anything which gives an indication because of abusive users, maybe for example, you, you drive a car in that way, have brand new tire, gets totally out in 5,000 kilometers, then obviously there is a directly relation to the user driving. So those are, those are the additional corner cases worse scenarios are defined in the user's policy. So if a regular driver is driving the car in a regular way, technically nothing to worry about, but still average user, because in India it's not something like the roads. Those are. So we have already factored in those kinda costs in our maintenance package. So 99% of the cases we don't have to worry about.

Akshay: So, end of 2019, you said you did your fundraise. How much did you raise and whom did you raise it from? 

Tarun: So first immediately from the syndicate platform we raised two and a half crore through Let's Venture mainly. And then one year later, then we raised follow subsequent round.

The first round of funding was through l we had some group of individuals that they onboarded. I, I think there were a lot of. Businesswise strategy wise, things that evolved after we raised the money, the first round of funding, whatever the idea we had, the way we wanted to scale this kinda business we, we faced lot of challenges.

I think first round of funding I think 3, 4 month we faced the covid outcome and the covid in some ways supported this kinda business plan. Cause a lot of demand for the personal cars started after the covid scenario. But the, the challenges were more on the the demand remains always high in this business model.

The challenges were more on the financing side of FinTech side. Okay. How you are able to fund, let's say I have to buy hundred cars, then obviously you can't use the quity money to buy the hundred cars. And that is where I think our initial effort started. I think first we able to convince, ICICI bank shown confidence in the model and they funded our initial line of money, but then banks will always come with a limited..

Akshay: A bank fund individual cars. Like would I say, I say give you money for every car you bought, like they would ask you to submit documents for each car. 

Sameer: So overall assessment, underwriting is done on the company base. They give us a revolving credit line. However, the documents obviously is done on a car to car basis because car to car basis, the underlying security is the car for the bank.

Akshay: So if you're buying hundred cars, then essentially you're getting hundred car loans from ICICI bank in a way. Yeah. Yes, yes. Okay. You were saying that the, you needed lending or you needed lending partners to help you scale. 

Tarun: So I CICI came on board. Then we initially thought ok for a bank, it's a beautiful place because right now when banks funding a used car, banks generally trade used car as a risky category, even though there is underlying security.

But the, the delinquencies of the defaults are way higher than a new car, and what we identified the majority of the loans, the default in the loans not cause of the credit behavior or the credit issues. They were majorly cause of the asset failure that people start showing default tendencies. Cause maybe after one year my vechicle needs 1 Lakh repair and maintenance, they know after spending this much of money. There is no guarantee that this vehicle will not ask for more money. And And then there is a principle outstanding, those kind which leads to a delinquency kinda nature. So we believe ki when we are taking care of this entire service maintenance, then obviously the delinquencies are gonna be lower and then banks should give us infinite money basis on demand.

But obviously the banks, banks don't work in that they will always leverage our equity versus debt. And then we started getting into that problem where our equity was like, like 2.2 and then obviously beyond a five, six year no banks will go into fund debt. So that is where I think we, we pivoted from asset heavy to asset line.

And then we started now more working through a FinTech kinda approach. Cause the more demand, I'm only able to fulfill the demand if I have the right supply in terms of financing, whether supply from the car purchase, those kind of ecosystem are well created uh, the demand is there both from the corporate world, from the retail world we are creating.

The biggest question mark is around the financing. I think the entire initial post covid. The asset light shift helped us growth thousand percent in last financial year. So we created a model. 

Akshay: What is, what is the difference between asset heavy and asset light model in in your business? 

Sameer: So in our business, in asset heavy model, the cars remain on our books, which means we buy, we take a loan and we give it out on lease. In a asset like model, we take our cars on lease. 

Akshay: For asset heavy, you need to put in like maybe 20% of the car value, and 80% can be financed, something like that. 

Sameer: Initially it was, but now over a period of time when banks have also got the comfort of seasoning with us we, we don't need to put in beyond 5% of the money for any car.

However, having said that, when we take these cars from our financial partners on an operating these basis, it basically means it is on their books, which is not on our books. We just value add and give it out to the end customer.

Akshay: They would buy or you would buy and tell them, okay, this car I'm buying on your books.

Sameer: They would buy basis our assessment. So we have the customer who looks at a car, we assess the car, and then they buy and they continue to treat it on their books the way they have to depreciate, and we further sublease those cars to our end customers. So we become in the process. 

Akshay: So the, the difference is only that 5% of your own money that you have to put in between these two models.

Sameer: Not only 5%, but also it makes us asset. Like, see again, as you said, if banks were to fund me directly, I mean there is a limit, there is a concentration of risk that happens, right?

How, how for how long can they, they can't fund me for 1000 crores but if I have multiple lenders at the market end.

Akshay: Why not? I mean, you could work with multiple NBSCs and get 1000 crores each one. 

Sameer: That's what we are doing. But it is a mix and match. So what means is if there are people who are taking the risk on their books or bind these assets on their books, My concentration of risk problems also gets sorted out.

So if I tomorrow immediately need, say, 20 crores or 30 crores of debt in one month, a bank may not be able to support me. But yes, these leasing partners and these lending partners can support me without actually coming on my books. 

Akshay: Okay. So it's essentially like, a mixed like these are different channels, and you want to maintain a healthy mix between different channels.

Sameer: Absolutely. Absolutely. 

Akshay: Okay. And, and what is the split? How much is where it is not your, on your books and how, how many of your cars are not on your books, and how many are your books? 

Sameer: Like almost? I think 60 to 70% would not be on our books now, 70%. 

Tarun: Also, I think initial ones that we, that we purchase were on our books. And there are some cars, some cases, obviously with banks lines, we can't deny the rates are better. And obviously the excess with banks from a long term perspective is definitely not favor. So we always, I think we believe in this remain in a mix of 60, 70% remains assetline, remain 30 % remains in banks, which comfort and don't create lots on concentration on compoff.

Akshay: So your margins would be better when it's on your books, right? Because you would probably anybody who's taking the car on their books is earning that extra margin, which you are having to build, then..

Sameer: Absolutely the margins are better. We get the benefit of deposition as well. However, there is a limitation, but as Tarun said, we've maintained a healthy mix and we want to continue that way growing as well.

Akshay: Okay. Okay. Got it. And tell me about your procurement process. How, how do you ensure supply of good quality inventory? I would say that. In used I mean any used product market it's all about supply. Like, if you have good supply, then the demand is there to tap. So, so how do you ensure good quality inventory?

Sameer: So if you look at our supply chain partners, we have almost all the institutional players thoroughly tied with us. There are, these platforms use our platform.

Akshay: What does, what does that mean? Institutional players?

Sameer: Like institutional players like OLX, Cars24, Spiny. We take cars from them. We also take cars from our new car leasing companies, but our criteria of assessment of these cars is very different from where a trader would assess that car. So, where a trader assesses that car, or typically a cars 24, will assesses whether this car is good enough to be done for the next three to four months, and is it at a good right value so that it can be traded at a better value with us, since we're taking a risk for the next three to four years on that asset, the core assembly of the car is more important for us, right? So we assess the car very differently. We have our own individual assessment criteria. is also an assessment app. There are a team of, know, inspectors who go out and assess the car basis, the requirement that we have. So hence the kind of supply that we are chasing is very different from what traders are chasing.

So for us, it's very simple that, the car has to run well for the next four years, three to four years, the risk is mine. And that is what also gives confidence to my end customers, that instead of they haggling for the right car, they have an expert who's going to take that risk. So it is in their interest, does it get me a better car?

So, it works out very well from there. Apart from that, we also are, have a dealer model wherein uh, all the large dealers can, can list their inventory with us, which is already pre-approved, which means, these cars are pre inspected, pre-approved, and can be offered to the end customer as a, as, as a lease or a subscription. So this is the entire channel how we, how we operate. 

Akshay: So, help me understand this dealer model. 

Sameer: So you as a dealer, if you have 20 cars, we pre inspect outta which five qualify for our lease program because the cars are good.

Those cars can be listed on a platform wherein a person can come choose and there is already a price available. And the moment he says yes, we immediately go and procure that car because we know where it is. So we run an inventory like model. Typically we always run an inventory like model. We don't wanna keep an inventory with us. It's just when the customer comes, we'll buy the car. 

Akshay: Yeah. I agree with you. It makes no sense to buy an advance because each person would have their own taste and preferences and what color, what model, and so on. 

Sameer: And actually, that's the basic difference between a car rental company and us.

In a car rental company. You first have a car, then you hunt for a customer. And since the customer has a very limited choice with us, it's the other way. I'll first have a customer, he chooses his car, and then we go out and hunt for the car of his choice. 

Akshay: So you are actually acting like a concierge for the customer. The customer would probably share with you his preferences and then you would go out, identify, share some options with him. Tell me the customer journey, like what is the customer journey like? 

Tarun: So the customer right now uh, comes to our platform. They give us the idea. There are virtual cars, there are some dealer partner cars, which are listed on our platform.

User selects the car as per his requirement. 

Akshay: What, what do you mean by virtual car? 

Tarun: Like, so virtual car, but the basically uh, like, so we list a 2015, shift car for example. We'll also list 2018..

Akshay: Okay. Which you are confident that you will get those cars. 

Tarun: Okay. So those cars which are commonly available in the market, plus the dealers real cars are also available on the website.

User select cars. Simple then give us a very simple token money in order to show the confirmation that he's willing to take the car on subscription. There is a credit check, instant upload of his banking and we run a civil check through experience on user civil, so basically combination of bank. We basically give him a confirmation what kinda of cars he's eligible to subscribe from PumPumPum.

Once those two criteria are met. Third step is very simple he give us month security in advance, one month rental and we pick you the car and deliver the car to the used doorstep. 

Sameer: And this entire process is done within 15 days, at best 15 days from the time he chooses to the time it's deliveres.

Akshay: Okay. So what would be the monthly subscription for say like a shift 2015,.. 

Tarun: Like so 2015 monthly shift going to be sub 18, 19,000 rupees aprox.

Akshay: How does it compare to the EMI cost if like for a customer, like what is the match for a customer? If a customer was to think that, okay, let me buy it and take a loan and pay EMI versus let me lease it, what is the math for them? 

Sameer: If you typically look at a Swift 2015 will cost you around four to four and a half lakh rupees in the market, retail price, almost five Lakhs.

If the usage was to be saved 12 months, because our product is available for six months, 12 months, and 24 months, if you were to take a loan for five lakh rupees for at best 12, 24 months, your minimum EMI that you would be paying will be around 25,000 rupees. And, and this is just the EMI that I'm talking about, right on top of it, you can need to get the insurance done, you need to get the repair, maintenance and everything with us.

And the use case is only two years. The only gets to pay 18,000 rupees a month, everything included. Drive that car, gives it back to us. End of two years. Either he upgrades or he is going to another CT can take another car. Everything is possible. He wants to extend the lease extension is also possible. So you, it's typical 10 to 15% lower than, than actually taking a car or buying it himself and then disposing after two years.

Tarun: But here also there is a good consumer like Sameer mention user actually go for a four year loan because they look at the EMI. I mean, if I'm planning to buy a five lakhs car, then I know give my monthly spending capacity is 14. 15000 rupees, then what I will do, I'll do a four year loan or five year loan. But average data of ownership, says the user keeps cars for two, two and half, three year max. So the user actually passing on current problem to the future. Okay? After two and half year, technically you cannot sell your car. The user look at the EMI, that I'm paying 14, 15000. But after two half years, there is be principal outstanding and you can't close, you can't sell your car first you have to clear off the loan, then only you can sell the car.

So that's the complication that people get into when they take a loan slightly longer to the duration they're actually planning to own. So the subscription perfectly meets the criteria of the usability. And you pay actually for the time that you're using the car.

Akshay: The, the cost of ownership overall is lower through leasing than if you buy, maintain, and sell so that maybe a five lakhs car you will sell in 3 lakhs. So that 2 lakhs you spend over two years plus maintenance and all of that. So that will be higher you're saying. 

Tarun: There could be two also, there could be major issues also, whether you buy a 5 lakhs car as you make a normal scenario, there could be a, the user market is a very great market, there are some issues which are very major but at the time of purchase user just rectify those issues that they're not visible maybe for three months over, but they'll come in your lifecycle. So, those things also leads to your future price. It can be any, anything. So nobody's securing your pricing. So if you're taking a car for 18,000 for 12 month, then you are sure even car needs Indian replacement, you, it's not go out from your pocket. Your cost of money remain safe.

Akshay: Got it. I think essentially the biggest value add for a consumer, and if I was a consumer, would be the risk that you're taking off the table. Even if there is a price differential or even if there's no price differential, but that risk is a big deal. Got it. And you raised another round in 21, right? How much was that? And for the..

Tarun: Next round then we raised around 6.5 crore, the road that was I think mid April 2021. And we recently I think four, five month back we raised 2 million dollar. Include security and some web deck put together so and so. Yeah. 

Akshay: So what is the what are the things that you need to unlock to grow 10 x? Like, like what are those challenges in front of you right now? 

Tarun: So, I think majorly was the financial partnership. I think now we are very confident with the kinda base ecosystem that we have created the lending as a problem getting solved and now the demand is not a problem.

So we are both in corporate and retail. Right now we're only in two geography. Delhi NCR and Bangalore so for us to go at 10 x, we can immediately start our services in Hyderabad and other metro cities very easily. The demand is definitely there, plus the corporate sid e is still holds immense potential because there is a clear cut precedence of the base level, which already established from the new car leasing company.

So all new car leasing companies jointly put together there were active fleet 1.5 lakhs cars, which is even because of their in every I'll say limited scenario where the eligibility or the, the option available for car lease only VP and above like top 10% because of the long term requirement of four to five year, the adoption, even though there is a tax benefit, lease benefit, but the adoption outta those 10% percent still remains very low, not more than to 15% technically companies is.

What we have seen in our offering, companies are very comfortable opening our policies, 50% of their employees. Cause that is where the used car, entire used car ecosystem makes sense for larger audience. And there are all the leasing traditional issues that generally companys in terms of launching policies. We have very much flexible very much simplified our leasing proposition for the companies. So now even a startup, a well funded startup, can simply open our lease program for their employees because it gives them a good retention tool for the companies. It's a very HR friendly or HR policy which they want to rule out for, for their employees.

So what we're seeing that companies are technically opening our policy to 40, 50% people. And used car is something where usability is not long, the one, two year. So demand is also almost eight to 10 x higher than what a new car leasing companies are having in the company. So these are the good channels, plus retail remains a very huge opportunity.

But right now, retail basically cause of our direct exposure on the users. So we keep our major focus on the corporate. So I think 70, 75% of our current portfolio is through the corporate lease. 25% is the retail subscription because the, the risk of default remains with PumPumPum, okay, so there we only underwrite highly credible user good salaried people only, but now we have some, some plans to to create a model where simply the risk from can be spread to different lending partners. Okay? Instead of retaking risks, people will take risk on the user. And those are some, some future plans that we are working out, but remaining with the corporate and the existing play, we confident with the current growth rate. I think we'll touch 10 x maybe in a couple of years very easy. 

Akshay: So your corporate customer acquisition must be happening through like a sales team. How do you acquire retail customers? 

Sameer: So retail customers are through the digital journey. Is basically digital marketing, Facebook ads. Yes.

Akshay: So your longest lease plan is like 24 months. What happens after 24 months to the car?

Sameer: So the car, there are three options that the user has. Either he can surrender the car and move on. He can surrender the car and upgrade, he can extend the car. All three things are possible. What we have seen as a consumer behavior, almost 85 to 90% of the people whose leases have ended have actually remained our customer.

Which means either they have upgraded or they have continued to use the car. There's hardly been a person who's once driving a leasing car has gone back to owning. I mean, that, that in my entire career also, I haven't seen many people cause once you start driving with that comfort and with that kind of a thing, you really don't want to own a car.

Akshay: If, if somebody surrenders a car, then what? Does it get reused in the platform or do you sell it or like it gets redeployed? 

Sameer: It gets redeployed, it comes back to us. It is refurbished. Once again, it is crosschecked for every parameter and based on if it is ready for deployment, it is up on our inventory list and, and our sales team is free to redeploy that car.

Akshay: So what is the role of technology in this business? Like what are the touchpoints where technology can make an impact? 

Tarun: So the user journey, basically the onboarding of the user, the entire thing remains through technology from the partnership perspective. So what we are building to our workshop partner, to our dealer partner. So we are giving them enabling basically a dashboard kinda thing where they can simply upload their inventory. We have in-house inspection team basically to the legal inspection. So the dealer gets a verified report of their vehicle also we can use for their sale purchase Also the workshop partner gets a regular business with PumPumPum.

They have a clear understanding where, which car coming mapped with that workshop so that the repeat job can also be assigned to those workshop only. Then basically there is a IOT device which is enabled in all the car, which is a it's a GPS enabled device, which helps us monitor the vehicle health also and the user behavior also.

Okay. So the kilo,eter can be monitored on a, on a monthly basis. The driving give us the indication whether a user is a good driver or bad driver. So those are the things which are basically we have also created a drivers score also that is right for internal use also. So our system knows wether he a good driver or bad driver. We can actually give on, give out incentive to good driver also and bad driver. We can keep a watch on those people. And initially we used to do put the devices onboard diagnostic device, which used to give all the health parameter like your temperature, your vehicle like performance parameters whatever things you see on your dashboard. everything gets monitored in real time.

So our idea is to use that device to basically get on preventive approach in terms of vechicle, of, in terms of weaker instead of some minor issue, which can possibly leads to a bigger issue at ending, ending up with a high amount of repair and maintenance, we can actually identify issues that source and rectify the issue without ending up high, high spending on the service and maintenance.

So, but, but the challenge that we face in the OBD device, that the current OBD device are majorly designed from the fleet operator perspective, which are only one to, to do the geofencing or the driver monitor, but they're never designed from a retail or individual perspective. And the compatibility of these devices are also not very friendly.

So what we have seen, even we have tested one of the best words, but they're not compatible with all the cars. They're compatible with 50, 60% of the car. So that is where what we have done, we have stopped uses the OBD devices and we to receive good of. We can diploy some funds on the R & D side of the device, which we can create for our own purpose, which can actually announce the user safety, enhance the vehicle performance. Also user unnecessary, getting stuck on some highway, it's better if we get update, which can lead to issue. So idea of our technology is to make the weaker. Fully kind of, like, like tech enabled. So anything, it's a car, the car can go wrong, but our idea give whatever the best form of technology we can use. So the user experience remains seamless throughout the users.

Akshay: Like if, if there is a breakdown of a vehicle, then the user will just call you and then it's your responsibility. 

Sameer: Absolutely. There's a 24/7 roadside assistance already available. He can just, the car can be towed to the nearest workshop and he can go back home safely. So that's not an issue. Everything has been bundled into the price that we've already, done for him as, as an end price.

So, so idea is, it's not only about maths, it's not only about financing, it's not only about risk, it's also about convenience. I mean, there is a huge amount of convenience wherein we've also seen, especially a lot of interest from women drivers. I mean, generally women who are traveling, students who are traveling once they get stuck, it's a beautiful model where they don't have to take a risk on anything and your usage is very, very limited and for a very limited period of time as well.

So that is where this, this entire bundled offering takes, takes really makes a lot of sense for the end customer.

Akshay: What is your fundraise pipeline looking like? So, that seems to be like the key unlock to really grow 10 x, right? So, what is that pipeline looking like for you? 

Tarun: So currently, I mean, basically the market scenario, like, the, the funding plan we have taken this maybe for six to one year.

We remain focused on our core parameters. We want make this entire piece right before we scale. We are continuously focusing on the profit already. So funding in this kind of business is not, we, not burning a lot of money. So technically for our current business, we don't need good amount of funds. What we're planning maybe for a year to focus on the profitability and scale in our current territories, so that current market scenarios they recover the amount of valuation and amout that we are seeking. So we are planning to use our ask at the right time when the market conditions are upward. And unlike the, the burning models, we don't have to rely on the funding only. So that is, that is one key, key approach we always take internally. If a single car is not making money, then it's better to keep the car idle without, we never give out any car if it gives me a burn or loose.

Sameer: And Akshay, this time also gives us the opportunity to assess the risks that the business carries. We are continuously monitoring the risk and also taking steps both in terms of operational efficiency and compliance to, to cover our risks as far as possible so that, once we grow, we only have the focus on growing and nothing else rest, everything is sorted out. So, this gives us a wonderful opportunity for the next six months to one year to do that.

Akshay: Okay. So, you mentioned about the plan to reduce the risk on your books. I'd love to learn more about that. 

Sameer: Yeah, see, it is still under process. So, what really happens is we are looking at a model wherein, the end risk, the way we've just done for leasing for ourselves is something that is also passed on to the lenders in the retail sector as well, right?

So, so which means we don't have to worry about scaling up. It's an individual to individual risk, that lender base, but that's still under process. I believe actually be too early to talk about that. But yes, that's a model we're building which, which obviously will shape the future of going into the retail. And we'd also pave the path for us going into retail in future. 

Akshay: That would essentially be like a matchmaking service. You would find a lender who's willing to or, or an investor who's willing to fund the car for a particular buyer profile. And you would probably have some sort of a platform fees for enabling that matchmaking plus the maintenance and all the operational work that you will do. Something like that. 

Sameer: When we said our core will always remain to us, we will be underwriting the car. I mean, we will be taking the risk on the ownership. It's just about a matter how we can scale retail and in which, the risk can be spread from the financial perspective. That's the model risk. Rest everything will remain the same. There's nothing that's going to change for the end. 

Tarun: Idea, idea of spreading the risk rather than taking will pass on the PumPumPum risk to the lender. So the lender can be manual, like maybe, private, limited individual, whoever wants to put money. And there are people who are planning to buy car, take a loan leasing subscription.

So we, we, that's very, very long vision, is right now we planning for two or three years subscription. There is a partner simply there is a matchmaking and basically this, that, and we give a user summary credit. Everything is there. If there are some user credit score is low our system can show you. Okay, someone is saying, okay, I can give a lone four,4, 5% a person wants to accept.

So we become a platform for that kinda aggregator and without us any, and we keep our service maintenance, everything ensure, so that our lender know that asset is secure and our customer also knows, okay, the asset basically take care. 

Akshay: So you said you are focused on profitability. Give me like some breakdown, like say we talked about that Swift 2015 example where you would charge 19,000 per month. What would be the profitability for you in that? What would be your cost in that? 

Tarun: So, so basically on a monthly basis we make something around 15, 20% kind of operating margin.

On a month, on month basis that is basically from, as a combination of our financial cost plus service maintenance cost, the insurance component that factored it. And then there is, there is 5, 10% percent margin we make on the resale of the vechicle, so for example, two year if I decide to resell the cars, so the original value that we factor in the, the, they're generally lower, 10% lower to the expected market resale price.

Ok. So that is where we, we make some of our money as margin. So in total, if you look at if I cumulate the entire sourcing margin, procurement margin on my resell margin along with my service maintenance insurance. So we're, we're making a 25, 35% kinda gross margin on a month on month basis. 

Akshay: Okay. How, how do you offer service maintenance? Pan India? Like that would be pretty expensive, right? Like you said, roadside assistance. Is it through third party tie ups or..

Sameer: Yeah, it is through we companies like us thrive on, on partnership models. So actually in the use cars space today, you have a lot of people who are aggregating lot of workshops. Pan India. so just to give you an example, today as we speak, our cars are running in almost 50 cities. We are managing, even though we are sourcing customer only in Delhi and Bangaloru, but, my customer base is in almost 55 cities spread across the length and breadth of the country.

And we've been managing it beautifully. I think the Google rating says it all. We've been rated at 4.7 as amongst the topmost leasing player in terms of customer service. So, the partnership model is something which is working very well for us. It doesn't put us into drain of any CapEx.

It's a pure ops, it is based on need and, and there are terms and conditions which are pre-agreed. There are turnaround times which are pre-agreed, and it's a pretty standard practice in the leasing industry, how we work that. 

Akshay: So I'm guessing someone like a go mechanic might be that aggregator of workshops that you would be working with too.

Sameer: There be people like Bosch, there are people like PitStop. There are people like Go Mechanic. And then there are obviously authorized players as well. There is authorized workshop network from the O, which we also have a 

Tarun: Leasing from a core logic also always. So starting this business model five year back was difficult because of these, these infrastructure was not very organized.

Why we start this model or make sense now. Because now buying selling of vehicle is not a challenge. You can buy a car from Cars24 digitally, real time in like 30 minutes. Previously, the entire buying selling was offline. Like, so creating a model, so the service maintenance kind like created your insurance companies, digital insurance companies created.

So leasing is a basically a bundle bundling of all the organized layers, which are there in different, different pieces. We club it together and we bundle it offering a single solution to the end customer. So, so that's how the leasing always makes sense. 

Akshay: Got it, got it. Okay. Okay. Amazing. So essentially today the leasing business is more about financial engineering and, and being able to do good financial engineering than about operational, operationally heavy kind of workloads. And if someone wants to like end in the middle of the lease, like you said, that somebody got a job change and had to change cities or whatever, then..

Sameer: So we have very flexible what generally leasing is. Leasing is like funding traditionally. Right. So if you were to foreclose a lease I mean it's like foreclosing a loan in which, there is a market value. there is a penalty, there is an outstanding book value and there is a market value of the car, which, which God knows what is right and what is wrong, whatever leasing company says is right. But with us, we have a very specific foreclosure terms, which says, beyond a certain lock-in period, you can foreclose the car.

However you need to pay X number of rentals. The rentals are fixed. So a person goes, what he needs to pay, now I can go ahead and wave that off if that person goes to another city and takes another car from me. So it's a flexibility that we provide.

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