Pilani Soft Labs, the Bangalore-based company running redBus.in, the online bus ticketing service, is finalising its next round of fund raising at an aggressive valuation of as much as 11 times their net revenue of close to Rs 55 crore, thus valuing the company at $110 million (around Rs 605 crore).
"It is an extremely aggressive valuation when compared to the average of around 4.5 times the net revenue some other travel aggregators are being valued at. I understand the deal is nearing the final stages, in which global private equity player Warburg Pincus is also in the fray," an investment banker said. Avendus Capital, it appears, is advising Pilani Soft Labs on this transaction.
According to another investment banker, Pilani Soft Labs is targeting to raise $20 million in a primary and a secondary transaction, enabling it to provide an extremely healthy exit to SeedFund, its early investor. The latter has invested over two tranches. During May 2011, the company had raised $6.5 million from Helion Venture Partners, Inventus Capital Partners and SeedFund. Phanindra Sama, chief executive and one of the co-founders of redBus.in, declined to comment on the fund raise.
Sama started redBus.in with two friends during 2006, after he found it quite difficult to buy a bus ticket during the festival season to go to his home-town from Bangalore, where he was working. The company has over the past years consolidated as a leading bus ticket provider, by aggregating as much as 1,000 bus service operators across 10,000 routes in India.
On an annualised basis, it has a gross merchandise value of close to Rs 600 crore, on which it makes revenue of close to Rs 55 crore. It is expected to post a net profit of close to Rs 2 crore for 2012-13. "The valuation is aggressive because of the scarcity value and also due to the better margins in this business when one compares it to the airline ticket portals. While one always has an option of booking tickets directly on an airline website, the same is not the fact when one has to book a bus ticket. redBus.in has been good in aggregating as many as 1,000 bus operators and the number is growing further," the investment banker explained.
Travelyaari.com is another aggregator in the bus ticketing service segment, also understood to be looking at raising $10 million.
Pilani Soft Labs is raising a fresh round of funds at a time when the company does not have a dire need for it. However, it wishes to have the gunpowder ready for an aggressive expansion. It is understood the company has as much as $6 million as reserves from internal accrual and from the earlier fund raise.
In addition to the online route of booking tickets, redBus.in offers tickets through the cash-on-delivery mode, besides the brick and mortar route by being present in 26 locations across India. It operates on a hub and spoke model. Besides this offering, redBus.in also sells two cloud-based software, called BOSS and Seat Seller which it developed in-house, to bus operators (for managing their operations), and travel agents (to aggregate and sell tickets across multiple operators).
In the middle of last year, it also launched a mobile application and is betting highly on this, as there is a distinct possibility of mobile internet outnumbering the desktop reach.