Car and bike rental startup Drivezy and self-drive car rental company Zoomcar are in beginning talks for an equal merger, with a share swap deal. Zoomcar was started by American duo Greg Moran and David in 2013 in Bengaluru, is now supported and backed by Mahindra and Mahindra Ltd (M&M). Drivezy, launched as JustRide in August 2015, came to its own different brand in July 2017.
Two companies collaborate or merge when the cost of business rises to its peak and companies are unable to cope up with the losses.
According to a report by CNBC, as per one of the source, “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.”
“If both companies are going to merge, the new ownership structure should be comfortable to each and every debt lender… All the assets and liabilities will be put on the table. And they (lenders) will approve any merger only when there is enough money to cover debt and its repayments,” said a spokesperson as stated on livemint.
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 deal will only be approved if there is enough money to cover debt and its repayments. Zoomcar is looking for a valuation of US$ 350-500 million and the company is backed by Mahindra according to a report. Drivezy is looking to achieve a valuation of US$ 400 million. Both startup companies have raised money with the help of debt funding. While Zoomcar has raised US$ 100 million, Drivezy had raised US$ 5 million via an initial coin offering (ICO). Top investors in both startups are most probably to hold stakes in the merger deal.
The exact reason why these companies are opting for a merger is yet ascertained, but this collaboration might be a new beginning to India’s new mobility rental vehicle startups and encourage new upcoming startups to this. Both the companies are decently funded and have enough reserve money to carry on until the next funding. As this market is not much explored in India, this merger can be a big revolution to this market and may give a stiff competition to cab services like OLA and uber, it will be interesting to see the strategy and how these companies will work and attract the customers.