Drivezy And Zoomcar Could Be Looking At Merger To Tap Growing Car Rental Market

Car and bike rental startup Drivezy and self-drive car rental company Zoomcar are in initial talks for an equal merger, with a share swap deal.

According to a report in Livemint, the talks between the companies are still in the exploratory phase and may not result in a deal unless both sets of lenders come to terms. If the deal succeeds, then top investors in both startups are likely to hold stakes in the merger.

Zoomcar, which was founded by Greg Moran and David Back in 2013 in Bengaluru, offers self-driving rentals as well as car subscription. The company is currently backed by Mahindra and Mahindra Ltd (M&M).

Drivezy, which was launched as JustRide in August 2015, is part of the Inc42’s 42Next group of the most innovative startups in India. The company also offers rentals for cars and two-wheelers to customers, while car owners can list their vehicles on Drivezy’s platform for customers to select for rentals.

“Zoomcar might look at a share-swap deal, which will allow the company to pay existing shareholders using equity shares, rather than paying the sum entirely in cash,” said one of the sources.

Inc42 reached out to Drivezy for a response, but it wasn’t available at the time of publishing. We would be updating the story with a response on the merger as soon as it comes.

One of the conditions for the merger is that the new ownership structure should be comfortable to all the debt lenders, adding that all the assets and liabilities will be put on the table. The merger will only be approved if there is enough money to cover debt and its repayments.

Zoomcar’s losses increased by 10.2% in the year ended March 2018 as compared to FY17. The company’s financial statement had shown that it was due to the rising costs of doing business. The company’s expenses rose to $39.22 Mn (INR 268 Cr) in FY18, from $32.20 Mn ( INR 220 Cr) in FY17. Meanwhile, annual revenue rose to $22.47 Mn (INR 153 Cr ) from $17.17 Mn (INR 117 Cr) in the previous year.

Drivezy’s Growth Story

Drivezy had raised $5 million via an initial coin offering (ICO) in 2018. It later turned to debt funding to grow its fleet of vehicles. In terms of funding, the company has raised a total of $32 Mn in equity financing from investors including Das Capital, Axan Partners, IT-Farm, Yamaha Motor Ventures, and Y Combinator, among others.

The company claims to have a customer base of about 1.5 million registered users and with around 93% of them coming from the 18-35 age bracket. Cofounder Ashwarya Singh told Inc42 in an earlier interaction that it has processed over 4 lakh bookings, and has 500 employees in 11 cities.

The company earns a 15-30% commission for every successful transaction. Last year, it clocked a GMV (Gross Merchandising Value) of $32 Mn, growing by 200% since 2017. It’s targeting a GMV of $80 Mn this year.