Meru to spend Rs 600 cr to buy regional taxi brands

Mumbai: Meru Cabs, a pioneer in the radio taxi segment, is set to spend about $100 million (a little over Rs 600 crore) for acquiring service providers in the next couple of months.

Dismissing speculation over Uber being in talks with Meru for a buyout, Chief Executive Officer Siddhartha Pahwa said they were in an advanced stage of raising about $150 mn. A large part of it would be used to acquire small to medium-size taxi service provider brands across India.

“I believe in the long run, only two or three players will survive. We are in an advanced stage of discussion to acquire multiple regional brands, as they will release some pressure from the constraints on supply and cost,” Pahwa told the Business Standard.

The brands being considered — a couple had approached Meru on their own, he said — have a fleet size of 100 to 1,000 cars. The south and northeast are among the areas where these deals could fructify, Pahwa indicated.

India Value Fund Advisors, which has a little over 80 per cent stake in Meru, would divest some of this for the fund raising. “IVF would dilute stake but they are not exiting. The $150 mn will be used for acquisition, expansion and development of our network. Consolidation at this point in time is good for the industry,” he said.

Pahwa also has a stake in Meru. The company reported its first profit in 2013-14, of Rs 3.6 crore. In 2012-13, it had a loss of Rs 31.1 crore. As of March 2014, the accumulated loss was Rs 215 crore.

“Cost and supply are big constraints at the moment and the consolidations are a step in that direction, to cool off some restraints. Some of the deals take time, as arriving at the right valuation might take a little extra time,” added Pahwa.

Meru has 12,000 cabs, servicing about five million people. About 6,000 are owned by it. “We are present in 15 cities and expanding at a rate of a city a month. In a few months, we have exceeded that rate as well,” said Pahwa.

It recently began a Meru Eve service for women passengers in Delhi, with 50 cabs owned by Meru. The plan is to expand this to 2,500 over 12-18 months.

India’s current taxi market comprises 600,000 cabs and combined yearly revenue of Rs 11,000 crore . According to Valoriser Consultants, the sector has been growing at 20 per cent annually.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.