Mahindra & Mahindra to buy 55% of India's PE-backed Meru

Mahindra will subscribe to newly issued shares across several tranches for a total consideration of up to INR1 billion ($14 million), according to a regulatory filing, with the first installment to be paid by the end of October. The conglomerate will have the option to acquire the remaining shares from existing investors for no more than INR980 million.

True North will not exit through Mahindra’s initial investment, but the firm will see its stake drop from 80% to 35% following the issue of new shares, Vishal Nevatia, the firm's managing partner, told Livemint. It expects to exit Meru within three years. Following the investment, Meru will become a subsidiary of Mahindra.

Meru launched in 2007 and claims to be one of India’s oldest ride hailing companies. It differs from rivals like Ola and Uber in that it owns its own fleet of cabs, with over 20,000 vehicles in 24 cities. True North – then called India Value Fund Advisors – first invested in the company in 2006 and has re-upped several times, most recently a $50 million commitment in 2015. Additional backers include Brand Capital, which invested $22 million in 2016.

Meru’s revenue has dropped in recent years, from INR2.8 billion in the 2017 financial year to INR1.9 billion in 2018 and INR1.6 billion in 2019. Nevatia attributed the decline to drivers leaving the service for its asset-light rivals, which have been burning through cash reserves to offer incentives that rapidly build a driver base. However, he expects drivers to return as Ola and Uber remove incentives to rationalize costs, making these platforms less attractive.

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• Topics
• South Asia
• Technology
• Consumer
• Trade sale
• India
• True North
• TMT
• automobiles
• Transportation