Takeovers and mergers are a way for any business to grow quickly. An already established and running business when taken over by another enterprise will straightaway add to the customer base of the new enterprise and also give the promoters of the business that is being taken over, an exit option.
App based taxi business is booming in India, with many mobile friendly youngsters quick to take advantage of the benefits of the same. Elders who are not so mobile or app friendly have a choice to either learn to use the new app based system or to remain prey to the haggling cab drivers. Many choose to download the app and learn to use it, even if it means that they have to exhibit their ignorance to their kids. A smoothly functioning app based cab system works to the advantage of all – and business is good, for the cab driver as well as the customer. The promoters for their part appear to have deep pockets that they can dig into to keep the business afloat until it can stand on its own feet.
At present, Uber is the market leader in the category. The acquisition of TaxiForSure by Ola cabs is an aggressive move that puts it in direct competition with Uber for the number one slot. Ola cabs is backed by Japan’s Softbank and the deal will be a cash and stock based one. At two hundred billion dollars, it is the biggest e-commerce deal after Flipkart’s acquisition of Myntra. This is expected to help the business to not only grow to be able to take on Uber, but also help it to focus on lowering costs, especially in the face of increasing regulation.
As of now, the transport aggregation industry is not clearly regulated, but this is expected to change with demands for increasing security. The acquisition will also be a challenge to Uber as it has no offline presence in the market and has no intentions of having one in the near future. This action falls in line with taxi operators all over the world aggregating together to form an alliance against Uber.
Ola cabs has been looking for funding for the last two months to keep up with competitors who appeared to have deeper pockets. Ola cabs found it much easier to raise funding than TaxiForSure cabs did and this may have helped TaxiForSure in coming to a decision to sell out.
App based taxi operators have until now been claiming that they are pure technology companies who merely worked with taxi operators. This aspect is viewed differently by the authorities who insist that they obtain a radio taxi licence and fall in line with the regulations for taxi operators. The takeover is a good sign in many ways. It signals that Indian businesses are going the global way. For the Indian consumer, it remains to be seen how the taxi fares will pan out in the long run as competition keeps getting them from being eliminated.