Do a vertical deep dive on India's used-car chain for Gaadivik Auto, a listings site. Where does the profit pool sit, and what should Gaadivik own next?

About two thirds of the roughly Rs 18,522 crore yearly pool is dealer margin and a fifth is financing; listings hold under 2%. Gaadivik should next own the transaction layer, inspection, paperwork and insurance, which lifts what it earns per car from Rs 800 to Rs 5,300 with little capital and puts it at the moment the loan is chosen. Lending should come through partners first; inventory last, if ever.

A wedding has many hands in it: the hall, the caterer, the decorator, the photographer, the card printer. Ask where the money goes and you find the hall and the caterer take most of it, while the card printer, however busy, takes very little. A used car is the same: one transaction pays several businesses, and a listings company sits at the card-printer end. Sizing only listings tells you how big your current slice is. Sizing the chain tells you which slices are worth moving into, which is the real question in a Series B.

So price every slice per car, then multiply by the cars it touches. The dealer earns 6% of Rs 4.5 lakh, Rs 27,000 on every car. A financed car carries a loan of Rs 3.375 lakh, and 3.5% a year for three years is Rs 35,438, earned on a quarter of cars. Inspection and paperwork earn Rs 3,000 on every car, insurance Rs 2,500 on 60% of cars, and listings Rs 800 on every car. The total market moves Rs 2,02,500 crore of cars a year.

Because the pools are gross, before the cost of earning them, and the costs differ wildly. A dealer's Rs 27,000 is earned by owning a Rs 4.5 lakh car for weeks, paying to refurbish it, and carrying the risk that it sells for less. Financing's Rs 35,438 needs Rs 3.375 lakh of lending capital per car and the credit losses that come with it. Listings and services need software and people, not balance sheet. So read the chart as a map of prizes, then weigh each prize by the capital and risk it asks you to carry.

Own the transaction layer: inspection, paperwork and insurance. It multiplies revenue per car by more than six, from Rs 800 to Rs 5,300, with almost no capital, and it puts Gaadivik inside the deal at the moment the buyer decides how to pay. A certified inspection report is also the data a lender needs to price a used-car loan, which makes financing the natural next step. Start lending through partner banks and finance companies, taking a share of the spread, and move to a loan book only when Gaadivik's own data shows lower losses than the partners'.

Keep inventory last. Dealers own the biggest pool, but buying stock turns a software company into a used-car trader with working capital, price risk and thin returns on capital. Say the limitation, too: the financing figure assumes the loan is outstanding in full for three years. A loan that amortises earns on a falling balance, roughly half as much, which would cut that pool to about Rs 2,000 crore and make the transaction layer look relatively better, not worse.