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India’s largest bus ticketing company redBus.in has been approached by private equity firms for a possible stake sale.
According to investment banking sources, a number of PEs have evinced interest in the ticketing site over the last few months to buy stake, in part or in full, for a valuation of around Rs 800-900 crore. The talks are in very early stages, according to the source.
Rs 300-cr turnover
Repeated attempts to reach redBus CEO Phanindra Sama through phone and email did not elicit a response. redBus, which sells bus tickets in India – both online and through some select outlets, has a turnover of Rs 300 crore in March 2011.
Latest data on its revenues are unavailable as the company is privately held. Founded in 2005, by BITS Pilani students, Sama along with Sudhakar Pasupunuri and Charan Padmaraju started redBus.in, seeing a huge potential in selling bus tickets akin to IRCTC, which was selling train tickets.
While it had a good run till 2012 with the company selling one crore tickets, in the last year or so, things have started to slow down due to a combination of factors. According to industry watchers, bus operators want to have their own software platform to avoid sharing revenue with companies such as redBus.
The company has tie ups with all major bus operators such as SRS, VRL Travels and others.
Bus ticketing has a lower entry barrier and low margins as it is volume driven.
Couple this with bus operators like VRL or SRS wanting to set up their own platforms has resulted in a slowdown in tickets sold through redBus.
Tech investments
Also, the technology involved in linking to the databases of 300 bus operators in India (which is growing), multiple permutations involved in bus route selection, seat availability all in a matter of seconds, is putting pressure on redBus to increase tech investments, in a low margin business.
“If you book a ticket from VRL Travels or SRS, you get a discounted fare every time and this means benefits of using their platform is passed down to consumers,” said the head of another online ticketing company, who did not wish to be quoted.
>venkatesh.ganesh@thehindu.co.in
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