The Indian startup ecosystem is again witnessing a resurgence of funding after almost two years of drought during the COVID-19 pandemic. A prime example of this revival is Rapido, a nine-year-old ride-hailing service, which has recently secured $200 million in its Series E funding round. This financing round was spearheaded by WestBridge Capital, an existing investor that holds a 24% stake in Rapido.
Of the total, a majority, 60% or $120 million, was infused by WestBridge Capital in July. Other venture capital firms, such as Nexus Venture Partners, Think Investments, and US-based Invus Opportunities, also participated in the Series E round. After this fundraising, Rapido’s valuation has now soared to $1.1 billion, making it India’s newest unicorn.
There could be no better time than now to decode Rapido’s meteoric rise and identify factors that led to the growth of India’s newest unicorn. Let’s have a look at India’s ride-hailing sector and how Rapido plans to use these new funds.
Strategic Expansion: Beyond Bike Taxis
Rapido is leveraging its recent funding to expand aggressively into new segments.
Rapido, a market leader in the bike-taxi segment, launched its cab services in India in late 2023. The newly acquired funds would be primarily directed towards expanding its four-wheeler taxi service to compete head-on with industry heavyweights like Ola and Uber.
In addition to its foray into four-wheeler cabs, Rapido is also setting its sights on India’s quick commerce sector. The startup is planning to venture into hyperlocal deliveries with 10-minute and 30-minute service options, utilizing its extensive two-wheeler fleet.
By implementing an in-house logistics optimization strategy, akin to Zepto’s approach, Rapido will reduce its dependence on external delivery services and vehicles. This strategy will allow the company to skillfully control costs, enhance service reliability, and drive revenue growth while maximizing operational efficiency.
“We’re in talks with quick commerce companies as well as existing ecommerce companies who want to make their deliveries faster. The supply is available…our fleet is bigger than Swiggy and Zomato. We have over 600,000 monthly active riders on two-wheelers. We’re in talks for such integrations…and are maybe a few months away from (launching the service),” said Aravind Sanka, CEO of Rapido.
Outpacing the Competition: Rapido’s Unique Approach
Rapido’s rapid growth in India’s ride-hailing market is a testament to its strategic approach and operational excellence. While traditional players like Uber and Ola have dominated the space for years, Rapido has carved out a significant niche by focusing on the underserved two-wheeler segment.
India’s two-wheeler segment accounts for over 65% of the overall vehicle retail sales market. This is mainly due to the fact that bikes and scooters offer a more efficient and cost-effective solution for short-distance travel.
Interestingly, Rapido’s early focus on the two-wheeler ride-hailing segment allowed it to tap into a vast customer base that appreciates the affordability and convenience of bike and scooter rides. By offering 2W rides at 25%-40% less than traditional cabs, Rapido quickly gained traction, expanding its presence to over 100 cities across India.
It is worth noting that the two-wheeler ride-hailing market in India has experienced explosive growth, with the number of rides surging from 141 million in 2019 to 318 million in 2023. According to Allied Market Research, this market is expected to reach a staggering $1,478 million by 2030.
Following the launch of four-wheeler taxi services, Rapido has firmly established itself as a strong contender in India’s ride-hailing market. As of March 2024, Uber maintained the lead with 19.3 lakh daily rides, while Rapido clocked in at 16.5 lakh rides per day, edging out Ola, which managed 13 lakh rides.
Rapido’s growth is also powered by its diverse offerings, with auto-rickshaws contributing 40% to its Gross Merchandise Value (GMV) and bike and cab services each adding 30%. Notably, bike taxis remain Rapido’s most significant segment, accounting for over 50% of the total number of rides. Last month, the company crossed the $1 billion GMV mark.
Innovative Use of Bike Taxi Services
Another aspect that sets Rapido apart from its rivals is how it uses its bike taxi services not just for passenger rides but also for delivery services.
Rapido is currently handling between 2.3-2.5 million orders daily, with 7% of these coming from business-to-business (B2B) services. In a strategic move, Rapido fulfils food delivery orders for Swiggy during off-peak hours and has onboarded the Open Network for Digital Commerce (ONDC) as a logistics partner. This multi-pronged approach not only maximizes the utility of its fleet but also enables Rapido to diversify its revenue streams.
SaaS Pricing Model
Rapido’s strategy in India’s competitive ride-hailing market includes a unique subscription model for its drivers. Unlike the traditional commission-based model used by many ride-hailing companies, Rapido charges its driver partners a flat daily or weekly fee. This approach provides a more predictable income for drivers and aligns with Rapido’s goal to attract and retain more partners. The decision came after Google-backed Namma Yatri launched a SaaS model for auto drivers.
However, it’s worth noting that other established players like Ola and Uber have also adopted similar strategies, reflecting a broader shift in the market towards subscription-based models.
The Road Ahead
Looking at Rapido’s financial performance in FY2023, the company’s operating revenue grew an astonishing 205.5% YoY to ₹443 crore. However, due to the 96.3% YoY increase in expenses, the company’s losses also surged 53.8% YoY, amounting to ₹675 crore in FY2023.
If Rapido aims to go public in the near future, just like other unicorns like Zomato and Ola Electric, it must achieve profitability and present a compelling case for its financial sustainability to attract investor interest.
Rapido’s journey from a bike-taxi operator to a diversified mobility and logistics platform is nothing short of remarkable. With a clear focus on scaling its core services, innovating pricing models, entering new market segments, and leveraging strategic partnerships, Rapido is setting itself up as a formidable player in India’s ride-hailing and quick commerce sectors.
As the company continues to navigate challenges and seize opportunities, the question remains: How far can Rapido go in redefining mobility and commerce in India? Only time will tell, but its recent moves indicate a company ready to ride the wave of growth to new heights.