Grab and BluSmart Meet Under the Radar, Shaking Up India's Ride-Hailing Sector
A significant development is shaking up the Indian ride-hailing industry, as Grab, a major player in Southeast Asia”s ride-hailing sector, explores the possibility of acquiring a stake in BluSmart, an electric-cab startup in India. The recent covert meeting between Punit K Goyal, BluSmart”s co-founder, and Anthony Tan, Grab”s CEO, has generated considerable intrigue.
This secret meeting, which took place in Bengaluru, marked the culmination of discussions that commenced three months earlier. During their visit to BluSmart”s charging hub in Bengaluru, Grab”s top leadership, including President Ming Maa, CTO Suthen Thomas Paradatheth, and CPO Philipp Kandal, joined CEO Anthony Tan. While investment talks have not been independently verified, it is widely believed that Grab is exploring the possibility of acquiring a stake in BluSmart. Despite this, BluSmart has denied any investment development, although it did confirm the visit by Grab”s team.
BluSmart has garnered significant recognition for its efforts to establish a comprehensive electric vehicle (EV) ride-hailing service and EV-charging infrastructure network. With accomplishments such as covering 300 million all-electric kilometers and maintaining a substantial fleet of 5,500 EVs, BluSmart operates over 4,000 charging points across 32 hubs in Delhi-NCR and Bengaluru.
On the other hand, Nasdaq-listed Grab, which was valued at nearly $27 billion during its December 2021 listing, faced a market capitalization dip to $9 billion in October 2021 due to the tech downturn. However, the company has staged a recovery, currently boasting a market cap of around $13.6 billion. It is expected to report $2 billion in revenue and achieve EBITDA break-even for the current year.
BluSmart, founded in 2019, has carved out a niche in India”s ride-hailing market, which has long been dominated by Ola and Uber. Unlike its larger competitors, BluSmart operates an app-enabled taxi service with a fully-controlled, asset-heavy model. As of FY22, BluSmart reported INR 32 crore in revenue but faced losses of INR 2 for every rupee earned. In contrast, Ola, while significantly larger with INR 3,082 crore in revenue, also reported consolidated losses at a similar 2.3 times its revenue.
To contend with Ola and Uber in the electric-cab segment, BluSmart is targeting a fleet size of 10,000 electric cars by the end of FY24. It has established a robust charging infrastructure with over 4,000 charging points across Delhi-NCR and Bengaluru. While BluSmart has garnered attention with its zero-cancellation policy, the absence of surge fees, and its fully-controlled cab service, its scale of operations remains smaller compared to its rivals.
As BluSmart rapidly expands and claims an annual revenue run rate of INR 400 crore, the need for substantial funding becomes apparent. The company had initially aimed to raise $250 million, but these plans did not materialise. To address this, BluSmart has altered its financing strategy. Its fleet is now supported by Gensol Engineering, a solar-plant construction business that secured a $75 million loan from Power Finance Corporation for electric vehicles. Additionally, BluSmart conducted a rights issue, raising $37 million from existing investors. Currently, the company is in talks with various investors to secure additional funding.
BluSmart faces challenges in ensuring the necessary supply of electric vehicles. Tata Motors, with its Tata Xpres T EV, has played a significant role, with BluSmart placing orders for 10,000 units in mid-2022. However, BluSmart”s fleet size currently stands at 5,500, and uncertainties persist regarding whether car manufacturers can meet its fleet expansion plans.
In response to BluSmart”s progress, both Uber and Ola have announced their intentions to electrify their fleets. While BluSmart has made headway with its differentiated approach to electric cars, its supply-constrained segment makes high cab utilisation and effective driver time management crucial for success. The company aims to achieve operating profits by December.
The possible entry of Grab into India”s ride-hailing market could disrupt the existing duopoly of Ola and Uber. The Indian ride-hailing sector represents an attractive opportunity, with a gross transaction value of around INR 30,000 crore, potentially allowing the top two players to generate $500 million each in annual revenue. With its focus on electric cars and cost-effective operations, BluSmart presents an intriguing opportunity. Grab, known for its early EV adoption and strong ties with OEMs like Hyundai, could become a significant player in this evolving landscape.
The Indian ride-hailing market, which had seemingly stabilised as a duopoly with modest single-digit growth, may see a significant transformation with the potential involvement of Grab. As BluSmart continues its journey and garners interest from major industry players, the dynamics of the Indian ride-hailing landscape could be set for change.
