Meru may explore merger with Mahindra group company

& Mahindra may merge Meru with a group company – most likely Mahindra Logistics – to usher in operational synergies and efficiencies following its complete acquisition of the radio taxi fleet operator, two people familiar with the matter said.

The synergies with the logistics arm could be multi-faceted, since Mahindra Logistics is in the business of supply chain and enterprise mobility, which includes diverse industry verticals such as consumer goods, e commerce and pharmaceuticals.

The company has been on a path to recovery after being severely impacted by the Covid-19 pandemic and has been earmarked for fast-track growth.

M&M may also put Meru’s fundraising plans on the backburner. The taxi fleet operator had
initiated funding talks with companies such as Japanese car leasing firm Orix Auto Infrastructure Services. The discussions had progressed between the ex-promoter of Meru for a possible stake sale to raise about Rs 350-Rs 400 crore.

A source who was part of the fundraising deal said M&M does not want to burn any more capital and has no appetite for further risk.

It’s a bit early to comment on the short-term revival of the demand cycle of both the business to consumer (B2C) and business to business (B2B) segments as the company gradually emerges out of lockdown-like restrictions and is looking at long-term business growth options, a company spokesperson said.

Meru’s investors, private equity fund True North, and its promoters Neeraj Gupta and Farhat Gupta, have exited the business, after selling their stakes to M&M.

M&M has plans to make the mobility services sector become a Rs 20,000 crore business (by value) by 2025. The segment includes three key verticals – Transport as a Solution (TaaS), Vehicles as a Solution (VaaS) and Mobility as a Solution (MaaS).

“It makes sense for Meru to play in the high-end, niche or the B2B space and stay away from the mass segment,” said VG Ramakrishnan, managing director of Avanteum Advisors.

Post-Covid-19, there has been a downturn in the B2C segment and Meru would not like to burn any more money, he added.

Meru will look to focus completely on its B2B business targeting corporate houses and go slow with consumers. The new business module will be to bring synergies with the different Mahindra businesses.

M&M is already an investor in self-drive car rental platform Zoom Car India and has integrated Meru EVGO and Mahindra’s electric vehicle platform Glyd for city and outstation travel.

Meru is primarily on a consolidation mode to optimise costs and improve profitability. It may take a call on funding and business expansion once offices start reopening and businesses stabilise, sources said.

Meru had been losing out to competition and had started offering niche B2B services, including providing cabs to corporates.

Its revenue had fallen to Rs 156 crore in FY2019 from Rs 277 crore in FY2017.

In May this year, Mumbai-based M&M
bought out Meru, ending the latter’s run as an independent entity that had lagged in competing against ride hailing platforms Ola and Uber.

Meru’s expansion plans include creating infrastructure to operate a fleet of over 300 Electric Vehicles (EVs) across India, with the eventual goal of increasing it to 10,000 EVs.

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