After Ola & Uber Success, Bus Aggregators to Take the Wheel

Mumbai Bengaluru
Startups such as rBus, Shuttl & ZipGo attracting investor attention
After Ola and Uber disrupted the taxibooking market, a new set of startups is looking to transform how you commute by bus, forcing investors to take notice.Emerging companies such as rBus, Shuttl, ZipGo and Cityflo have began providing shuttle services, including to business hubs such as Bandra Kurla Complex in Mumbai, allowing commuters to book seats in AC buses either online or via mobile apps. rBus, which currently plies on seven routes in Mumbai, recently raised an undisclosed amount from seed-stage fund India Quotient and angel investor Anupam Mittal. Ola, India’s largest cab aggregator, too, is preparing to invest ` . 120-150 crore to launch a bus service, all of which has attracted leading investors including Sequoia Capital, Nexus Venture Partners and IDG Ventures to this fledgling sector.

The market for bus services is much larger than that for taxi-booking (which is estimated to be `. 60,000 crore), said Mittal, an early investor in Ola. There is a very large and growing population of commuters who would rather not deal with the hassle of parking if a reliable daily commute is available, he said.

Delhi-based Shuttl secured about ` . 19.5 crore ($3 million) from Sequoia Capital and angel investors and ZipGo is in talks to raise funding from Orios Venture Partners, according to sources familiar with the developments. Cityflo, founded by IIT-Bombay graduates in June, is also discussing with Nexus Venture and IDG Ventures for its maiden funding round.

Still in their early stages, these startups are experimenting with various business models. While rBus and Cityflo target long-distance commuters, primarily office-goers, Shuttl operates in restricted areas such as within Gurgaon, collecting payments through its app.

“All we are doing is enabling individuals to come together and design their own buses,“ said Siddharth Gupta, cofounder of rBus, which currently transports more than 250 passengers every day to and from Bandra Kurla Complex over 40 trips.

rBus charges Rs ` . 500 for 10 rides a week, for which it has tied up with chartered bus operators. The startup recently launched a mobile application for existing customers; it will be available to all by September.

“Aggregating buses is a very cash-intensive business,“ said Jerin Venad, cofounder of Cityflo. “We guarantee an air-conditioned, seated travel and an app to book our service on demand and on subscription,“ he added.The company, which began operations a month ago, runs on 14 routes and caters to more than 200 people in Mumbai.

“We have picked up business locations and residential complexes. By running buses to these corridors we are catering to a lot of people who don’t have a comfortable option to get to work,“ said Venad.

Several investors are still waiting to see which of these business models are likely to sustain before putting in their money.

“My view is that the premium segment is more attractive because it is extremely tough to compete with the government’s pricing for public transportation and make unit economics work in the affordable segment,“ said SAIF Partners principal Mukul Arora, who is evaluating deals in the space. Buses are a prime mode of travel in India, with about 1.5 lakh buses transporting some 70 million people every day, according to industry estimates.

Traditional bus operations are built around routes fixed by state agencies and private buses typically catering to employees of specific companies.

“Public transport has not kept up with new business centres coming up across metros, which has created a vacuum and need for these kind of services,“ said Prahlad Tanwar, director for transport and logistics at KPMG.

Even globally, the bus aggregation model is in its early stages -China’s largest cab aggregator Didi Kuaidi launched a shuttle service in July-and could run into challenges.Services like UberPOOL, a car-pooling service launched by Uber in the US, are seen as competing models. And industry experts warn that regulatory hiccups may pop up if state transport boards and private bus contractors raise a fuss.

“Threat from models like UberPOOL; ability to offer attractive pricing in the premium segment as compared to the cost of driving a car; building enough density to make it convenient on day 1… are some of the challenges that players will need to overcome,“ said Arora of SAIF Partners.

Source: The Economic Times
Advertisements

Author:

Neeraj; an entrepreneur & a visionary in the field of Railway, Defense & Automobiles, is a graduate in commerce and a Harvard Business School Alumni. He’s an expert in govt. liasoning & contracting and has an exceptional network & connections at both local as well as global level. He’s an expert in Market Strategy & Planning and has served number of overseas companies as an advisor/consultant. He takes a profound interest in upcoming startups & is very receptive towards ground-breaking ideas & innovations. He likes to brainstorm those ideas and if the values & philosophies matches; he is even ready to invest his resources, serve as a mentor or act as an incubator to futuristic businesses.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s