Home >Companies >People >You cannot run a business by paying money from your pocket: Siddhartha Pahwa

New Delhi/Bengaluru: Meru Cab Co. Pvt. Ltd, India’s biggest taxi firm by revenue, has just raised $50 million from existing investor India Value Fund and is in talks with other funds to raise double that sum.

In an interview, Siddhartha Pahwa, chief executive officer of Meru, talks about the market for taxi hailing services. Edited excerpts:

The industry has changed drastically since Meru launched in 2006. New firms such as Ola and Uber have led the technological changes, and are serious threats to you. How are you responding?

Very clearly, the efforts we’d put in from 2007 to 2013 have paid us rich dividends. We’ve become a household brand. Obviously, technology has significantly changed over the past two years, and Meru has pivoted from being a call centre-led business to a technology- and mobile app-led business. We now get 65% of our business from the mobile, and this will increase to more than 80% over the next year. Also, for the first few years, we were the only ones evangelizing the cabs business in India. Now, with two others (Ola, Uber) doing that as well, we believe the industry growth will accelerate.

What is your take on the discounting war in the cab services space?

We are creating a sustainable industry for the long-term, which means we are creating a sustainable income for drivers, a sustainable, good-quality product for consumers, and reasonable growth and profits for the organization that we are running. I clearly believe the kind of earnings that are given to drivers by some of the competition is on the boundary line of being unsustainable and unethical. You cannot run a business by paying money from your pocket. We have seen industry after industry go down if the margin profitability is not there. We have seen so many airlines get into a problem. When supply goes out…companies go down and, then, the prices just shoot up. We have seen that happening in telecom, too, and now we are seeing that with drivers.

You too have become a part of the price war.

We are the largest player…we have a large market share, and we will have to compete in the market to ensure that our market share does not go down. The advantage we have is that we are the only company that has been making profits for the last 36 months. We have been generating cash and we have the ability to give these discounts without compromising on profits, to an extent. The moment it starts impacting us and we reach a stage where we have to pay from our pockets... we will not go down that path because it erodes shareholder value.

Did you see a rise in the number of drivers signing up with Meru after Uber was shut temporarily in Delhi?

We have seen more drivers come to us. They see us as a sustainable and long-term platform. Our attrition levels are in low, single digits; and in the last few months, more new people are coming into our system. The number of people joining us has gone up by 15-20%, month-on-month, from the 3-5% month-on-month growth we saw before December.

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