All will be well: taxi service investors

Venkatesh Ganesh Bengaluru December 11 | Updated on March 12, 2018

Greater vigilance: Venture funds need to be careful when investing in an aggregator   -  THE HINDU

Confident that strong regulatory and monitoring mechanism will eliminate problems

Despite the Delhi government and some States banning the operations of taxi aggregators after a Uber cab driver allegedly raped a passenger, investors continue to place faith in them, in the expectation that the recent problems will be resolved soon.

Apart from Uber, the Delhi government has also banned other taxi aggregator companies, including Olacabs and TaxiForSure, from operating.

Early resolution sought

This development has not, however, deterred investors. “At all times we will continue to back businesses that are beneficial to people, in general,” said Rehan Yar Khan, Managing Partner, Orios Venture Partners, which has invested in Olacabs.

He added that the company has deep faith in the Indian framework and expects the issues to be resolved soon. E-mails sent to Accel Partners and Helion Venture Partners, who have invested in TaxiForSure, elicited no response.

However, others share a similar point of view and say that instead of banning the operation of such services, clear regulations must be laid down on the way these companies operate.

“To ensure our business model also meets the law of the land, we take care to partner with operators who have valid documents and verifications in place,” said a TaxiForSure spokesperson. “In the wake of recent developments, we are working with our operators closely and instructing and aiding them to follow the processes and procedures discussed and mutually accepted in our meetings with the authorities.”

Kalpana Jain, Senior Director, Deloitte in India, believes that the need of the hour is a well-defined monitoring and regulatory mechanism to address risks and security concerns in the business environment. Currently, there is no regulation for mandatory background checks on drivers that can be verified by the police.

Also, a recent PIL filed in a Delhi court pointed out that the government has turned a blind eye to cab services violating rules and laws by not checking whether the driving licence was issued by the State transport department.

Part of the problem is that this is a highly unorganised market. So, verifying taxi drivers becomes a huge headache, says B Rajiv, CEO of Helios Travel Solutions, which runs the Magicabs fleet in Bengaluru.

Big potential

Organised operators have garnered a mere 6-7 per cent of the ₹60-crore market.

Industry watchers also believe this will be a lesson for investors. “We believe that this is going to be a lesson for venture funds to be more vigilant in their approach before investing in an aggregator,” said Sanchit Vir Gogia, analyst at Greyhound Research.

Published on December 11, 2014

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