Drivezy Chooses Japan, US For IPO; Is It Time India Changes Listing Rules?

Bengaluru-based vehicle rental platform Drivezy is planning to list itself in the New York Stock Exchange or Tokyo Stock Exchange, skipping the option to go public in India altogether.

In an interview with Mint, Ankur Sengupta, Drivezy’s head of business development, said, “India is not an option for us (for an IPO) mainly because all of our current investors are from Japan and US, and secondly India’s existing laws don’t allow loss-making companies to sell shares to the general public.”

Founded in 2015 by Ashwarya Pratap Singh, Hemant Kumar Sah, Vasant Verma, Abhishek Mahajan, and Amit Sahu, Drivezy was formerly known as JustRide but decided to rebrand itself in 2017. It has raised $40 Mn equity financing over several rounds. Drivzey’s investors include Das Capital, Y Combinator, White Unicorn Ventures, Axan Partners, IT-Farm, Crowdworks and Yamaha  Motor Ventures.

Drivezy’s biggest competitor in the Indian market is fellow Bengaluru startup Zoomcar. The car rental company has raised close to $103.8 Mn from investors like Trifecta Capital Advisors, Mahindra Rise, InnoVen Capital, and Sequoia Capital. With steady revenue from its self-driving business, Zoomcar is expected to enter the unicorn club soon.

Currently, Zoomcar has its operations in more than 45 cities including Bengaluru, Delhi, Mumbai, Kochi and Pune. The company claims to have over 48 Lakh subscribers and a fleet of 6.5 K cars.

Ola also joined the self-drive market with Ola Drive in October last year. The service is available in Bengaluru and Ola intends to host a fleet of 20K cars by 2020

Drivezy’s peer-to-peer vehicle rental model is said to have over 4000 cars and 15000 bikes. The company currently operates in 11 Indian cities but plans to expand into 21 cities including Chennai, Kolkata, Jaipur, Indore, Nashik and Chandigarh over the next few months.

Will India Change IPO Rules For Lossmaking Startups?

Drivezy clearly pointing to Indian regulations as a hurdle is perhaps a sign that the government should reconsider its stance on IPOs for startups. However, it must be noted that the Bombay Stock Exchange’s StartUp Platform allows startups to go public without achieving profitability, but it does come with stricter compliance norms, whereas venture capital money is not so scarce in the Indian market that startups have to choose the BSE’s startup board, which has not really seen too many listings.

In October 2019, Sequoia Capital India’s Shailendra Singh said that Indian tech unicorns are at a “big disadvantage” since the Indian IPO system has been designed to reward profit-making companies. He cited examples of cab-hailing services such as Uber and Lyft, who managed to get themselves listed, despite losses.

“I feel as soon this gets enabled we will see dozens of global IPOs coming from India. I think that will be the moment that will put India on the global map instead of the regional map,” Singh added.

Drivezy’s listing plans come at a time when Ola, OYO, Freshworks and Urban Ladder are working towards going public in the upcoming two to three years. Droom, which is an indirect competitor to Drivezy, is also looking to go public as per founder Sandeep Aggarwal, who said the company plans to get listed on Nasdaq in 2021 through its Singapore-based holding entity, and could also look at a possible  Hong Kong stock exchange listing post the Nasdaq IPO.