Home / Companies / Start-ups /  Lockdown to hit debt repayments of mobility startups

An extended nationwide lockdown is likely to affect debt repayment schedules of urban mobility startups such as Zoomcar, Drivezy and VOGO, who have taken loans from non-banking financial companies (NBFCs) and private banks to finance procurement of vehicles, said investors and analysts.

Though many startups in the shared mobility space are well-financed to service near-term debts, a change in customer behaviour post-lockdown may hinder revenue growth and, consequently, their ability to repay loans.

Shared mobility startups are asset-heavy businesses and borrow money to finance the purchase of vehicles, while cab-hailing platforms such as Uber and Ola are asset-light business models, wherein the driver finances the purchase of vehicles and pays the EMI. If the driver defaults on loans, then the company can retrench the asset to repay the unpaid loan amount.

A Drivezy spokesperson said the covid-19 outbreak has altered the dynamics of shared mobility in India. While the leisure travel segment has come to a standstill due to the lockdown, “there is significant demand for monthly leasing" he said in a response to Mint’s queries.

Mint reported in March that mobility startups have been experimenting with several revenue models, such as subscriptions and franchise, ever since their launch in 2012-13.

“The drop in demand for short-term (vehicle) rentals will last for sometime even after the lockdown is lifted. But this will be offset by a rise in demand for weekly and monthly leasing as people shall look for safer modes of transport for their daily commute," Drivezy said.

In the initial launch stage, mobility firms dilute a small portion of their equity to purchase the first few vehicles, but as demand grows, there is a need for healthier financing options to add more vehicles.

Apart from bank and NBFC loans, urban mobility startups, including Zoomcar, Drivezy, Bounce and VOGO, have raised venture debt, which can be used to help these startups fund purchase of assets, as well as for operations.

Drivezy said around 40% of its assets are serviced through debt, and it has adequate runway to make obligatory EMI payments to their financers for the next six months.

The company currently has around 17,000 two-wheelers and 3,500 cars on its shared rental platform.

A spokeswoman for Zoomcar, which has around 10,000 cars on its platform, said it was obtaining the three-month RBI moratorium, while Drivezy said that some of its lending partners have already offered a moratorium.

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