BCCL arm invests Rs 150 cr in Meru Cabs

Meru Cabs said that it has achieved a more than 10% profit margin in five cities

Brand Capital, the investment arm of Bennett, Coleman and Co Ltd (BCCL), which owns The Times of India and The Economic Times newspapers, has invested Rs 150 crore ($25 million) in Meru Cabs.

Earlier this month, there were reports of Flipkart selling an undisclosed portion of stake to BCCL. While the details of the stake sale have been kept under the wraps, sources said Flipkart might have sold it to BCCL for Rs 500 crore.

Siddhartha Pahwa, chief executive officer, Meru Cabs, said, “Funding to be used to create category and new set of customers and promote our application. The only caveat is the money cannot be used to subsidise the driver. We launch in 15 cities over the next 12-18 months. Northeast is also a promising market and we might look there for expansion.”

India’s organised taxi-hailing market, currently at Rs 7, 900 crore ($1.2 billion), is estimated to reach Rs 1 lakh crore ($15 billion) by 2022. In May 2015, Meru raised Rs 300 crore ($50 million) from India Value Fund Advisors (IVFA). Since then, it has expanded to 24 cities, launched four different services, and grown its fleet size to 20,000 vehicles.

While Pahwa evaded questions on the valuation of the company, he said the fresh investment has been done in exchange for nominal equity.

“We managed to get decent valuation for this investment. It is in low single digits,” he remarked.

The firm said it has achieved around 10 per cent profit margin in five cities and has managed to breakeven in 10 cities. “Being the only profit-making taxi services company for its combined businesses of taxi operator and taxi aggregator, Meru would be deploying these funds to increase brand salience and awareness to widen its customer base,” the company noted.

It is in talks with a Southeast Asian taxi player which would give them certain know-how of business and in turn, Meru would give them technology support with backend dispatch engine.

According to sources, Meru is breaking even in almost all the cities it is present in and is growing at 35 per cent CAGR. For 2016, its revenue is pegged at Rs 800 crore.

Pahwa said a number of cab drivers who moved on to other platforms have returned, which is helping their expansion.