After eCommerce and mobile industry, it’s time for taxi industry in India to go gaga as the investors backed mobile taxi app startups are on the hiring spree in a bid to capture the lead position in the market. Uber, an app-based transportation network and taxi company headquartered in California, US, has set an eye on Indian radio taxi service company Meru. The ongoing discussion on the possible buyout of Meru could be concluded in next few weeks, according to the industry sources, and could value Meru anything between $335 million and $370 million.
This would be the first acquisition by Uber in India and could end up consolidating the mobile app-based taxi booking business in India – if the homegrown player Ola Cabs successfully acquires TaxiforSure. According to the rumors that flaunted on the internet few days back, Ola Cabs is in talks with TaxiforSure to acquire it at a valuation of $250 million.
Some of the analysts believe that Uber’s move could be well attributed to a bit of frustration and recent challenges that hurt the company’s reputation and business in India. Quite popular in Tier 1 cities, Uber is yet to capture a sizable market share in Tier 2 and Tier 3 cities where the penetration of mobile Internet and smartphone apps is disappointingly low. Unlike Ola, Uber is yet to offer its taxi booking service over a phone call and this has helped Ola to lead in India, which is being evaluated as one of the most promising markets for startups. Therefore, in order to match the offerings with Ola, Uber is trying to add the fleet of Meru, which primarily offers its services over a phone call.
Uber, at a valuation of $40 billion, is going trough rough patches after the recent ban imposed due to ill regularities and women security concerns in many countries, including US, Spain, India, Germany, Holland and Thailand. Though the company managed to raised another $1.6 billion in convertible debt last month, bans have badly hurt Uber’s plan to expand aggressively and now the company is actively pursuing the government of all such countries to satisfy their local laws and security concerns. The very reason also pushed Uber away from the possible acquisition of TaxiforSure as Investors of TaxiforSure found more headroom for growth with Ola.
“The investors (in TFS) preferred Ola as there is a sentiment that Uber is overvalued and there will be more upside in the stock of Ola,” said one person cited above.
Ola Cabs, which is valued nearly $1 billion, is in talk to raise $500 million at $2 billion valuation. And, venture investors believe that Ola’s valuation could soar up to five folds in next few years, considering its reach and potential growth in Tier 2 and Tier 3 cities. Ola is currently operating in 52 Indian cities and has fleet of 60,000 cabs handling 200,000 rides every day.
Meru Cabs, largely owned by India Value Fund Advisor (IVFA) is willing to hold a minority stake in Meru after selling it to Uber. IVFA holds 80% stake in Meru and was actively looking to monetize its investments for some time now. Their initial plan to go for an IPO took a jolt after the fueling competition from Ola, Uber and TaxiforSure.
On the other hand, Uber, founded in 2009, remains the largest mobile-app based taxi service company in the world. The company operates in 277 cities in 54 countries and has 2,000 employees. Till now, Uber has raised more than $4 billion in funding and has said it was opening in a new city every other day.