Meru Cabs was at the receiving end as Ola and Uber were gaining market share through the combination of strong supply-demand and providing a better experience to end-user. One of the first scaled radio cab services in the country couldn’t match up to the deep pockets, technology and execution of the SoftBank-backed firms.
Meru Cab has been losing market share to Ola and Uber for the past five-six years. As a result, the firm’s revenue slumped by about 77% to Rs 156 crore in FY19 from Rs 277 crore in FY17. The losing ground for the Mumbai-based firm can be gauged from the sum Mahindra is spending to acquire 51% in Meru Cabs.
According to a regulatory filing at BSE, Mahindra will acquire the majority stake in Meru for cash consideration of up to Rs 201.5 crore in two parts. The auto major will put in the first tranche of Rs 103 crore by October 2019 to acquire 55% stake with an option to acquire remaining shares from existing investors of the company for about Rs 98 crore.
A 55% stake for Rs 103 crore ($14.7 million) essentially means Meru is valued at about $26.7 million in the transaction. The amount involved in the transaction highlights that it’s a stress deal. True North, which holds 80% in Meru, invested about $80 million since 2007.
True North will reduce its stake to 35% in Meru, and plans to have a complete exit in the next two-three years.
Several subsidiaries of Meru – Meru Mobility Tech Pvt Ltd, V-Link Automotive Services Pvt Ltd and V-Link Fleet Solutions Pvt Ltd are also included in the deal. They will become part of Mahindra after the completion of the transaction.
The development comes soon after Mahindra Electric and Meru announced a joint electric vehicle pilot project in Hyderabad. For Mahindra, this is not the first experiment in the shared mobility space. Earlier this year, it started a new application Glyd for premium riders and had entered into a long-running partnership with Zoomcar to promote the use of electric vehicles.
Besides offering on-demand rides for users, Mahindra may leverage Meru’s fleet to offer services to corporates such as BPOs, KPOs, Banking, IT, and Airlines, amongst others.
Update: The story has been updated after evaluating BSE filing.
The development was reported by MIint.