Ananda Trust Invests $10 Mn In Zoomcar As Part Of SPAC Deal

Barely a week after Zoomcar inked a merger deal with Innovative International for Nasdaq IPO, the latter’s affiliate, Ananda Trust, has now invested $10 Mn in the car rental platform. 

Once the merger is completed, a new agreement will be executed under which Ananda will subscribe to 1 Mn newly issued shares of the consolidated entity at a purchase price of $10 per share. 

The amount will be invested in exchange for a convertible promissory note issued by Zoomcar to Ananda Trust. Besides, the transaction will also be subject to other customary closing conditions including registration rights.

In the event the deal falls through, the subscription agreement will automatically stand terminated.

The investment comes barely a week after Zoomcar unveiled its plans to go public on the Nasdaq via a SPAC listing. It has inked a definitive agreement for a merger with SPAC vehicle, Innovative International, to become a publicly listed firm. The merger will value the combined company at an ‘implied pro forma enterprise value’ of $456 Mn. 

With the Nasdaq listing, Zoomcar plans to raise $235 Mn that will largely be deployed to scale operations and to shore up its tech vertical.  Post the merger, Zoomcar shareholders will continue to retain a majority of the outstanding shares of the platform. 

Once the merger goes through, the combined entity will be renamed Zoomcar Holdings, which will then look at listing its common stock on Nasdaq.

The startup was founded in 2013 by Greg Moran and David Back (who exited the startup back in 2015). The Bengaluru-based platform allows users to directly hire a rental or a self-drive car directly through its website and mobile app. 

With 3 Mn active users and just 25,000 vehicles registered on its marketplace, Zoomcar continues to reel under the effects of the pandemic, which has wiped off a majority of its business. 

Problems Galore At Zoomcar

Despite being backed by some of the biggest investors in the world including Sequoia, Ford and homegrown Mahindra&Mahindra, the startup has failed to scale up since being founded nearly a decade back.

While the pandemic wreaked havoc on Zoomcar’s bottom line, the platform’s multiple pivots over the past many years have led increasing losses and high cash burn. Its debt-to-equity ratio stood at 1.57 in FY20 and worsened by a big margin to reach 2.40 in FY21.

Zoomcar’s revenue from operations fell by over 70% from FY20 to INR 79.3 Cr, with a loss of INR 152.6 Cr.

While it has raised $290 Mn in funding so far, Zoomcar has especially been caught between a series of customer complaints, related to the quality of service, delayed payouts, arbitrary charges and even theft of auto parts.

With the startup counting on a listing at the Nasdaq, Zoomcar treads vicariously as it straddles between listing amidst volatile market sentiment and raising money amidst heavy cash burn. What emerges from the situation, will decide whether one of India’s biggest car rental startups will see a better future. 

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.