In a bid to shore up follow-on funding and stay afloat, AS Justride Tours and Travels, the Mumbai based company that owns self drive vehicle rental platform Drivezy, has initiated a target-based asset sale exercise that aims to significantly pare its liabilities by August 31.
The deadline has been set by the company’s board of directors, which includes private investors such as Yamaha Motor Co and Das Capital, several people privy to developments at the troubled company told TechCircle on the condition of anonymity.
The company’s investors have committed $1 million as interim funding to see it through the transition, of which $250,000 has already been drawn down. The investors will consider a Series C infusion if the startup meets its targets, said one of the people cited.
While the size of the proposed Series C round could not be ascertained, the company, according to media reports, was in talks to raise a $35 million Series C round from existing investors, led by Yamaha Motor Co. However, some of the investors backed off from the deal and the ticket size was significantly reduced, according to the people cited.
The five-year-old startup has raised a total of $31 million so far. It last raised capital in November 2018 when existing investor Das Capital led a $20 million Series B round. Yamaha joined the round as a new investor. Earlier, the startup raised $5 million in the first round of its initial coin offering in February 2018 and $10 million from Das Capital, Axan Ventures, CrowdWorks and IT-Farm in October 2017.
The asset sale comes in the wake of failed merger talks with multiple peers and rivals including car rental firms Zoomcar and Revv, and scooter sharing platform Bounce. The company intensified its search for a buyer in recent months on apprehensions that its cash runway may not extend till the end of the year.
Drivezy’s board, the people cited earlier said, want the company to move to a pure-play marketplace model as prerequisites for follow-on capital infusions.
“The board has put forward an August 31 deadline (in line with the current moratorium deadline) to achieve a 40% reduction of its assets to reduce liabilities,” said one of the persons cited above.
The merger talks fizzled out largely because prospective buyers were apprehensive of taking on Drivezy’s assets and liabilities, especially given the severe financial impact of the Covid-19 pandemic on automobile rental businesses, another of the persons cited earlier said.
“Their debt obligations are piling up and they are finding it hard to manage. Anyone buying them is not only taking up the operations, but also the obligations. Most companies in the sector are reasonably intensive on assets. It’s’ not that Drivezy’s tech stack is something out of the world, or their brand is better than all. So, ultimately it’s an asset pitch. They want to sell off their fleet and pay back how much ever debt they can,” the person said.
Drivezy did not respond to a detailed questionnaire from TechCircle at the time of publishing this article. Emails to Zoomcar, Revv and Bounce also did not elicit responses.
Under the franchise model, Drivezy controls the land and lease agreement, while all other expenses including the operations, staff and fixed costs would sit on the books of the franchise holder. The company has been testing this model for over a year. As part of the instructions by the board, Drivezy is currently accelerating the franchise model and selling all the assets on its books through a newly-created marketplace category on its website.
The company has terminated the lease contracts of many of its parking lots in Bengaluru as it scales down operations in the city. It is looking at a transition to a full franchise model that focuses more on tier II, III cities, sources said. It is changing all company-operated sites into franchises to reduce capex of parking lots and operational costs. Currently, it has 23 franchise locations in five cities.
At the end of the asset sale exercise, the company aims to have zero assets on its books while the marketplace will have around 14,000 bikes and 2,200 cars, said one of the persons cited earlier.
While a majority of its business loans are covered under the ongoing loan moratorium, the company has been defaulting on vendor payments and is currently buying time till the asset sale completion for repayment.
Drivezy (formerly JustRide) was founded in April 2015 by NIT Allahabad graduates Ashwarya Singh, Hemant Sah, Vasant Verma and Amit Sahu, and IIT-Bombay graduate Abhishek Mahajan. The company started off as a platform that allowed individual car owners to list their idle vehicles for rent. It then added two-wheelers to the platform in 2017.
Drivezy was part of the 2016 summer batch of the accelerator programme of Silicon Valley-based Y Combinator. The company says it is also backed by internet search giant Google.