TABcab, which was once among the largest radio taxi operators in Mumbai, could wind up its operations completely in less than a year’s time unless it is able to cut its losses substantially in the next few quarters. Sources say that TABcab, which once had around 4,000 taxis on Mumbai roads, has almost halved its fleet size, as it struggles to stay afloat against stiff competition from taxi aggregators like Uber and Ola. Started by Nagpur-based SMS group, promoted by the Sancheti family, TABcab has received investments worth R400 crore till date, according to company officials. TABcab was launched in 2O12 after SMS Taxi Taxi Cabs Private Ltd, a subsidiary of SMS Infrastructure, won 4,000 taxi permits from the Maharashtra government in open auctions.
“In the absence of action by regulator, the business is not sustainable,” Anand Sancheti, managing director of SMS Infrastructure, told FE. Under current regulations, TABcab is required pay licence fee, ply 1,400cc CNG cabs and run within the Mumbai Metropolitan Region, whereas online aggregators do not need to follow any such rules. The company had then paid R104 crore to the Maharashtra government for the permits alone.
While the move to launch TABcab was part of the SMS group’s planned diversification from infrastructure businesses and the company had made an elaborate strategy to enter other markets like Delhi, Kolkata and Bangalore, those plans have been on hold as new investments are yet to materialise. “We began talking to a number of private equity players to raise around R600 crore sometime early last year, but by then market conditions had changed dramatically in favour of online aggregators. They (private equity firms) told us that they would come back if there is any change in regulations pertaining to online aggregators,” Sancheti said, adding, “If they (aggregators) are brought under the ambit of the Motor Vehicles Act and a level playing field is provided, investments made in the state of Maharashtra will not go waste”. Company sources maintain that TABcab is already behind schedule on debt repayment to banks and there is a risk of default going ahead.
The Maharashtra government is considering amending the Maharashtra Motor Vehicles Act to include online aggregators, which could entail, among other things, a payment of licence fee to the government and additional investment, which in turn could impact the margins of aggregators and their heavy discounting strategy. But for now private equity investors have clearly picked the winners.
Homegrown online taxi aggregator Ola has closed over $1.3 billion of external funding so far, of which over $1.2 billion has been raised over the past one year. In April last year, Ola raised $400 million in a funding round led by DST Global. And in October, Japan’s SoftBank invested around $210 million in the company.