The taxi-hailing industry is seeing gradual consolidation with clear lines being drawn between the few winners, who take it all, and those who get left behind. Ola’s acquisition of rival TaxiForSure for $200 million was a step in that direction. Meru Cabs also raised $50 million from India Value Fund last month to increase its penetration in existing markets. Siddhartha Pahwa, CEO, Meru Cabs, in conversation with Avanish Tiwary, says the company is not looking at acquisitions to expand.
A lot of investments have flown into the cab segment. How soon can we see clear consolidation?
All the industries go through mushrooming and then consolidation. The speed of consolidation depends on the nature of the industry. We believe the taxi segment is nascent right now and a heavily network-based industry. The better the network, the better the customer service, and the faster the consolidation. However, consolidation may not only happen through acquisition, but through partnerships as well. We prefer the partnership route over acquiring companies.
So you are not looking at acquisitions at all?
No, we are not looking at acquiring companies at this stage, though we are discussing partnerships. The taxi business is a micro-geography one, where every city has quality suppliers. However, they lack technology, quality processes and the ability to generate demand with marketing activities. We would like to partner these firms for cab supply. In turn, we will generate demand for them and help them with our technology platform. That is how we plan to do partnerships.
How do you plan to spend the Rs 300 crore from India Value Fund?
We have started to increase penetration in existing locations by augmenting supply. We see even smaller markets getting more diverse. Thirty percent of this investment money will be spent on acquiring new customers. We will offer price cuts, trial vouchers, surprise discounts, etc. as marketing tools. We have already achieved 2 million app downloads, within two years. We aim to take it to 5 million by the end of the year. We will also spend the money to expand into new geographies. We are already in 23 cities and our intent is to be in 40 by December.
Meru is known for owning its entire fleet. Why did you change the model?
In 2007, Meru started with 100%-owned fleet. Since then, the taxi business in India has evolved. With changing dynamics, Meru has taken many initiatives to keep up with the environment and has emerged as a modern taxi platform. One of the steps was to have an asset-light model — currently, Meru has around 95% of its fleet under aggregation.
Would you say there are signs as to who the market leader will be?
As I said earlier, this is a micro-geography industry. It’s not like a leader in one city is the leader overall. Of the four main cities, we clearly see ourselves as leaders in Mumbai, Delhi and Hyderabad. In Bangalore, we see Ola emerging as the leader whereas in Kolkata Uber has come out as the leader. However, Fast Track, a local player, is the leader in Chennai. Going by the number of rides, Ola and Meru are national leaders.
What is Meru’s unique offering?
We have a robust back-end technology that allows a predictive analysis of demand and supply for the next seven days. So, we can predict quite sharply the number of taxis that will be available at a given point and time for a week in advance. We are the only players to book cabs a week in advance. This is a very important service on our platform.
Second, we give our riders the option to choose how they want to pay for the ride, instead of forcing them to pay through wallet or card. Moreover, we are the only ones offering intra-city rides.
Do you think some big players are employing predatory pricing?
For any industry to grow, healthy competition is important. Many operators are resorting to predatory pricing to achieve monopoly. And any kind of monopoly hurts consumers in the long run. We appreciate that the Competition Commission is looking into the matter. If any support is required from us, we will work with them.