Bus-pooling app ZipGo Technologies Pvt. Ltd is shutting down its Bengaluru and Mumbai operations nearly seven months after receiving funding worth Rs 300 crore from Essel Group and a recent acquisition, a report said.
The company will cease it services in these two major markets by this month-end as it seeks to scale down the business, Entrackr reported, citing a customer care email and two unidentified persons.
The persons added that the crisis at the Subhash Chandra-led Essel Group has led to the scale-down decision. The Essel Group has significant debt on its books, taken by the Indian promoters for privately-owned infrastructure firms. The loans have been taken against shares in listed entities Zee Entertainment and Dish TV.
Last year in August, Essel Group had invested Series B funds worth Rs 300 crore ($43.7 million then) in ZipGo, which later said that two-thirds of the money has been pumped into the company.
ZipGo had said it would use the funds for expanding its bus fleet and route network as well as transitioning to a 100% electric fleet.
The funding deal will make ZipGo the country's largest technology-driven, business-to-customer bus company across metrics including cities, fleet size, rides per day, and revenue, the company had said.
The company had also announced plans of going beyond Tier-I and Tier-II cities to smaller regions such as Udaipur, Indore, Bhubaneswar, Mangaluru (Mangalore), Tirupati and Visakhapatnam.
Text messages to ZipGo co-founder Jitender Sharma did not get a response till the time of publishing this report.
ZipGo offers intra-city and inter-city bus services for individuals and corporates in Bengaluru, Hyderabad, Jaipur, Pune, Delhi-NCR (National Capital Region) and Mumbai. It allows users to book seats on its shuttle bus services through its Android and iOS mobile apps.
ZipGo was co-founded in 2015 by Jitender Sharma, Gaurav Agarwal, and Pritesh Gupta. Sharma and Agarwal had previously co-founded radio cab booking app TaxiPixi, which raised an undisclosed amount from Hyderabad-based mobile phone maker Celkon Mobiles in 2014.
ZipGo acquired Pune-based bus aggregator Supreme Trans Concepts in a cash-and-stock deal in October last year.
In all, ZipGo has raised around $53 million in funding till date. It had last year raised Rs 33.4 crore ($5.2 million) in a Series A funding round co-led by Omidyar Network and Chennai-based early-stage investment firm VenturEast Advisors.
In July 2015, the firm had raised $3 million in a seed round led by early-stage venture capital firm Orios Venture Partners.
ZipGo’s rival, Shuttl, raised $2.3 million in venture debt from Trifecta Capital in recent times. Shuttl had earlier raised $11 million in a Series B funding round co-led by Amazon Alexa Fund and Japan-based Dentsu Ventures.
In September last year, UAE-headquartered ride-hailing firm Careem acqui-hired app-based Hyderabad-based bus-pooling operator Commut. Separately, Shuttl inked a pact with Commut to absorb its customers and driver partners.
The sudden spike in funding activity in the space comes after a prolonged lull, during which homegrown ride-hailing unicorn Ola decided to shut its bus unit, Ola Shuttle, as part of efforts to “rebalance its portfolio”.
Apart from ZipGo and Shuttl, Mumbai-based Cityflo had also raised funding in 2015. The trio positioned themselves as cheaper and greener alternatives in metros, providing long-distance trunk routes connecting housing suburbs with business hubs.
But investor sentiment dampened after these players fell foul of local transport authorities.
At one point, ZipGo had to pivot to corporate customers due to frequent detainment of its shuttles.
A TechCircle analysis earlier showed that bus aggregators face a number of hurdles on the road to maturity such as last-mile connectivity, with patient capital being the need of the hour.