When Raghunandan G and Aprameya Radhakrishna started TaxiForSure.com in June last year, the aim of the two IIM Ahmedabad graduates was to reduce the time of prolonged wait for a taxi in the country. Today, nearing the anniversary of their venture, the duo is happy. For, their debut business has been appreciated by the country’s leading venture capital (VC) firms, which also made an investment in the online taxi booking site.
The size of the taxi market in India is roughly Rs 14,000 crore and is growing at 12 per cent annually. Organised players, though, hold only 10 per cent of the market, according to industry experts.
After investments in well-known players — Meru Cabs and Easy Cabs — VC and angel investors are on a buying spree for stakes in companies related to taxi services across the country. Recent examples: stake buyout in TaxiForSure.com by Accel Partners and Helion ventures, Tiger Global’s investment in Ola Cabs, angel investment in TaxiGuide.in and Inventus Capital’s investment in Savaari Car Rentals.
“With an increase in affordability, passengers are opting for more convenient radio taxis nowadays. This is causing an expansion of its fleet,” says Rajesh Puri, chief executive of Meru Cabs. The highly fragmented market is being changed into an organised one, which attracts more PE/VC investments, he adds.
Sources say taxi firms need capital as part of their expansion. Meru Cabs, which has a fleet of 5,600 cabs in four cities, plans to turn its size into 10,000 cabs in two years.
For instance, CarzOnrent, which runs EasyCabs, is looking for a second round of funding from existing investors — BTS India Advisors and SIDBI Venture Capital — to meet its expansion. The company is targeting a fleet of 30,000 cars, compared to 6,500 at present, in three years, and making the service available in 62 cities. Last year, VC firms invested about Rs 36 crore in CarzOnrent.
Rajiv Vij of Carzonrent India says taxi services in India are due for consolidation in the same manner as the beverages or home appliances industry consolidated a few years ago.
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“Within next five years, about 40 per cent of the market will be with organised players operating across India,” notes the managing director & CEO of the personal ground transportation service provider.
K Srinivas, managing partner of BTS India Advisors, while explaining about a possible exit route for VC investors, says, “A number of global players interested in entering Indian market would consider these companies as launching pad.”
Online taxi booking portals are also aiming at a faster growth in line with the taxi services market.
“The penetration of smartphones across the country makes online booking easier,” notes Anand Daniel of Accel Partners. “The pace of expansion in taxi fleet is likely to boost the revenues of portals too.”
Last month, car rental booking portal Taxiguide.in raised Rs 25 lakh from angel investor Anand R P, who is also the investment director at Squadron Capital.