Prakash Sangam in conversation with Sonam Sain.
From being an online bus ticketing start-up to foraying overseas and venturing into carpooling services, redBus has been on a long ride. Prakash Sangam tells Sonam Saini about the opportunities in this unorganised market, the roadblocks, and more. Edited excerpts:
After being acquired by Ibibo Group in 2013, and consequently becoming a part of MakeMyTrip, how has the business model for redBus changed?
redBus has been through three distinct phases. redBus 1.0 was a start-up launched for online bus ticketing that started off with a couple of bus operators in Bengaluru. This phase was about finding the product-marketing fit and getting investors, which happened with the acquisition by Ibibo. The 2.0 phase was about scaling up the business in other parts of India, and doing more transactions. In the last couple of years, we have taken the same business model to markets that are similar to India.
When the acquisition happened in 2013, we were doing business of close to Rs 600 crore in terms of GMV. Last year, that increased by Rs 5,000 crore.
How difficult is it to manage the bus travel ecosystem, when much of the business is unorganised?
We see our role in this industry as that of a technology provider. There are more than 2,500 bus operators; the average fleet size per bus operator is seven in the country. These are the people who own and operate the buses, but they don’t have the technology to help them provide better services, and that is where we step in. We are a platform on which bus providers can host their inventory and distribute not just to redBus but also to other online platforms. We also provide location tracking and analytics to bus operators.
Which are your key growth markets? You haven’t made much headway in the North and East markets…
Earlier, as high as 60% of the travel would happen from a metro or tier I city; this number has come down to 50% in the last two to three years. This year, we will see more people travelling from tier II and III towns. We are seeing growth coming from all over the country, but our base is much higher in the South.
Almost 85% of our business comes from the South and West markets. The market for private bus transport is less developed in the North and East parts of the country. Bus travel is not a preferred mode of transport in these markets. We have been doing some work to improve the perception of bus travel. Our annual marketing budget for this year is close to Rs 100 crore.
With Paytm and MobiKwik launching ticketing options, and state-run transport companies independently offering online bookings, how does redBus stand out?
We have done many things to make our product superior to others in the market. Apart from providing booking services, we also inform customers about operator reviews and ratings, which people tend to rely on a lot. The Indian bus market is very informal, so we provide features like boarding point navigation and bus tracking facilities.
Your parent company MakeMyTrip offers bus bookings, too. Doesn’t that cannibalise your offerings?
All the three brands — MakeMyTrip, Goibibo and redBus — are independent consumer franchises, with their own set of users. We are driving synergies in supply and powering bus bookings, both on MakeMyTrip and Goibibo, through redBus. We are investing a lot in technology plumbing, with integration of all the bus operators, at the backend, aggregating all the supply and then distributing the inventory.
What are your expansion plans in terms of markets and services?
State-operated road transport corporation (RTCs) buses have large fleets that connect the more remote parts of each state, but the online penetration of these services is as low as 10%. Our focus is to work with RTCs in order to improve this.
In terms of international expansion, we are present in five markets other than India. We have three tasks: be the clear market leader; reach 10% market share of bookings in every market; and be profitable. In Malaysia and Peru, we are close to reaching the benchmark. We are looking at expanding in Southeast Asia, Latin America and Eastern Europe. Last year, international markets contributed 5% to our overall revenue. Besides, we are looking at launching rPool, a cab sharing service, in Bengaluru, Hyderabad and Pune, to begin with.