Loss-making Mega Cabs to invest 500 crore to expand in 20 cities

Betting big on public points of transit, Taxi service provider Mega Cabs is all set to invest Rs 500 crore in the next three years to expand its services to 20 cities.

Mega cabs is currently present in six cities, including Delhi and Bengaluru, with a fleet of around 2500 cars.

Speaking on the development, Kunal Lalani, Chairman of Maga Cabs said that they feel by 2020 they will be in 20 cities with about 8000 vehicles. Investments will not only be in vehicles but also in technology and over the next three years they would look at overall investment of about Rs 500 crore, added Lalani.

On business model, he said that airports and railway stations are one of the biggest points of the business.

Mega cabs suffered losses when strong contenders like Ola and Uber entered the market but now it claims to be on a spree to revive itself both in investment and technology.

Criticising his rivals Ola and Uber, Lalani said that Ola and Uber come with a mandate and a backing of sheer money power and it challenges the basic fundamentals of business, that you must lose on every trip to make yourself so large and then recover money.

In last few years  many other radio taxi services were struggling their way out and some went closing. Even Ola and Uber incurred losses from 2014 to 2017.

Earlier, in a letter to the ministry of finance, Mega cabs along with radio taxi association has complaint that Ola's business models are in gross violations of the foreign direct investment guidelines on marketplace model of ecommerce services.

The Competition Commission of India (CCI) had dismissed allegations of predatory pricing against cab aggregator Ola. "Aggressive competition in the early stages of network creation takes place, until the market settles in favour of a few enterprises. In such markets, market leadership position can be fragile or transient during the initial stage of evolution of the market,” it said in a ruling on last Friday.

This means that competition is here to stay.  Each player  now is trying aggressively to expand and raise humungous funding rounds like Ola, and Uber, who have conquered most of the market whereas traditional radio taxis like Meru & Mega Cabs, were still found gasping in terms funding and expanding their services.

Ola raised a total of Rs 5504.81 crores by end of September 2015. Uber had also been able to raised funding to Rs. 161.78 crore by the end of 2014-15, and has deepest pocket with backing of international investors. Whereas Mega cabs was found to be lagging behind in this respect.

Today's announcement will surely impact existing competitors, as every player in the space is trying their best and spending money, to stay alive and get larger pie of the market.

Current targets for Mega Cabs comprises of corporates and retail segments, it will soon  roll out services in cities like Ahmedabad, Hyderabad, Chennai, Goa, and Jaipur.