China’s Shunwei funds Rapido, India’s answer to Gojek (UPDATE)

Bike taxis are yet to take off in India; an ambiguous regulatory stance is one of the reasons.

Source: Unsplash.

Bangalore-based bike taxi operator Rapido is in advanced talks with private equity fund Westbridge Capital and Chinese investor Shunwei for a USD 50 million dollar B round at a 200 million valuation, according to a local media report.

Existing investor Nexus Venture Partners also participated in this funding round, people familiar with the matter told LiveMint.

Shunwei is affiliated with Chinese smartphone maker Xiaomi.

Rapido was founded in 2015 by co-founders Aravind Sanka, Pavan Guntupalli, and S.R. Rishikesh as India’s answer to Southeast Asia’s Gojek. The company has been growing steadily since its inception. In 2017 it received a USD 750,000 backing from India’s top motor bike maker Hero Motorcorp in a strategic move.

Through the Rapido mobile app, users can book bike rides with a multi-lingual interface available in English, Kannada, Telugu, Tamil, and Hindi languages. Rapido calls its bike-taxi drivers as captains. Currently it has more than 30,000 registered captains including about 100 female captains within its network of drivers.

Commuters can enjoy a ride which is 40% to 60% cheaper than a cab ride. The process is easy: book a driver, wear a provisioned disposable one-time-use shower cap, place a helmet and get-going. For lady riders there are inbuilt security features like an SOS button in the app and number masking facility.

Rapido operates across 25 cities, primarily in south India, including the IT capitals of India—Bangalore and Hyderabad. The target of the founders now is to reach up to 50 cities in India within the next six months. The company as of now records 2.5 million orders a month and the aim is to strike 20 million orders by the end of 2019.

Rapido had acquired Hyderabad-based rival Getbike to enter the B2B segment in May 2018. Some of its other main competitors are Bounce, Vogo and ONN Bikes. One of Rapido’s former competitors, the Gurgaon based Baxi, had raised fresh funding from multiple investors in 2018, but has since moved to hyperlocal delivery of milk and other essentials.

In the last two years, many bike taxi start-ups had sprouted across India but most of them have closed operations due to a lack of funding, operational challenges and regulatory hurdles. Even Ola and Uber could not take off in this space despite having the plans.

There are also many challenges to Rapido’s growth and the foremost is falling foul with the regulatory authorities in India.

In February 2019, the Karnataka state transport department seized 200 bikes of the company for a variety of reasons such as non-possession of commercial vehicle license, lack of insurance for drivers and drivers not wearing helmets.

On a more serious note, in July 2019, the Madras High Court had banned the firm, until new regulations regarding bike taxis come into place. However, the order was relaxed in August.

In spite of all these hurdles, investors are queuing up to fund as they see the long-term viability of the business model and expect issues to be solved in due course. One regulatory issue that has been addressed by Rapido is the tying up with Acko.com to provide accidental insurance cover for both the driver and the customer.

Rapido has informed India’s Ministry of Corporate Affairs in its recent financial filing on August 19 that it has raised USD 54 million in Series B round led by WestBridge Capital and Nexus Venture Partners, with participation from other investors including Shunwei Capital, Alipay-backed BAce Capital, Sabre Partners, Integrated Capital Growth, among others.

With an investment of USD 31 million WestBridge will hold a little over 22% stake in the company, while Nexus will own close to 13% with an investment of USD 7 million in the bike-taxi company.

UPDATE: IST 17:58, August 27, 2019, added the last two paragraphs to mention part of the investment terms as reflected in the startup’s financial documents submitted to the government.