Bengaluru: Bus aggregator ZipGo Technologies Pvt. Ltd is in advanced talks to raise $50 million from Essel Group, a person familiar with the matter said. ZipGo wants fresh capital to grow its presence in India from the current 10 cities, the person who didn’t wish to be named told Mint. The Bengaluru-based company will also use the funds to offer bookings for electric buses and e-rickshaws, the person said.

ZipGo declined to comment. Essel Group also didn’t respond to an email seeking comment.

Essel Group, founded by Subhash Chandra, is present in areas including media, entertainment, packaging and technology. The company wants to invest in ZipGo as part of its push toward building infrastructure for electric vehicles, the person cited above said.

Last week, Essel Infraprojects Ltd said it plans to invest 1,750 crore across 20 cities in Uttar Pradesh to set up electric car charging stations and battery swapping terminals.

The news of ZipGo’s proposed funding was first reported by tech news site Entrackr.

Started in 2015 by Gaurav Agarwal, Jitender Kumar and Pritesh Gupta, ZipGo has raised about $8.6 million in capital so far from Orios Venture Partners, Omidyar, Ventureast and others.

Funding for bus aggregators have picked up this year. Last month, Shuttl, owned by Super Highway Labs Pvt. Ltd, raised $11 million in an exercise led by Amazon India, Amazon Alexa Fund and Dentsu Ventures.

The fresh funding has, however, surprised some investors given the regulatory issues faced by start-ups in this business. Ola, the country’s largest ride hailing app, shut down its shuttle service this year after running into trouble with regulators in Bengaluru, Delhi and other cities.

Shuttl and ZipGo have also been banned by some cities in the past.

These app-based transportation providers are hoping that regulations will catch up once they become popular with users as in the case of cabs.

They argue they do not own cars or hire drivers, but are just technology providers that aggregate them. But regulators have pushed back, saying these companies operate vehicles without permits.

“Bus aggregators have good metrics and the market is big enough. But the problem is regulation. There’s no grey area even—they are very clearly banned by law. So it’s very risky to fund them. Investors that are putting money into these companies are doing it despite the regulatory risk," said a partner at a venture capital firm on the condition of anonymity.

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