Singla’s focus is tier-two cities. In tier-two cities, distances are shorter, the fares are lower, traffic jams aren’t a problem and most people like using their own vehicle. Also, in tier-two cities, if someone isn’t using their own vehicles, there is an aspiration to travel in a car not in an auto.
Add to that the fact that Ola is present in almost all towns that Singla calls his stronghold. Ola’s Micro variant offers fares competitive to autos and snatches passengers away from Jugnoo. Let’s look at all of Jugnoo’s top cities. Jaipur? Ola and Jugnoo fight it out for on-demand transportation. Ola, sources say, does 1.5X times the rides that Jugnoo does. Indore? Same answer. Delhi NCR? Let’s not even go there. Jugnoo’s headquarters, Chandigarh? Uber and Ola dominate the market. Ola is also better funded and regularly blows Jugnoo out of the water on marketing spend.
You see the challenge here?
The fight for mindshare, let alone market, hasn’t been pretty. And Jugnoo is losing. It could clock just Rs 24 lakh in revenue in FY15 and has losses to the tune of Rs 83 lakh, according to filings with the Ministry of Corporate Affairs (MCA). How much have they raised so far? Almost Rs 110 crore. According to a few former employees, Jugnoo’s average ticket size is Rs 50 and it keeps a 10% commission on each ride. So, it makes Rs 5.
The only way Jugnoo can actually make money is by sheer volume. It doesn’t. On an average, Jugnoo claims it does about 35,000 rides a day through its network of 10,000 autos across 42 cities. The per kilometer rate in almost all of its cities is Rs 5. But Jugnoo reduces it to Rs 3 to get customers, say former and current employees. What about the other Rs 2? Jugnoo pays for it. On every ride, on ever kilometer. So, on an average ride of 10km, Jugnoo burns Rs 20.
Another matter altogether that Singla denies this.
“We lose 76 paise per transaction. It varies from 76 paise to Rs 1.30, depending on the scheme the auto drivers are on. Woh sab include karke, transactional burn per ride is about Re 1 average per transaction,” Singla says.
All hands on deck
In June ‘15, Jugnoo raised $5 million, but Singla realised very early in the game that he wasn’t going to win his fight with Ola on just the presence of his service. He needed to show availability. He had to get auto drivers to register on Jugnoo, so the company decided to waive commission until October ‘15. It increased the number of auto drivers registered on the platforms from 4,000 to 10,000. So, more rides, more money? Not exactly.
Onion. There is another problem. Apart from competition from other aggregators, and customers just hailing autos without the app, drivers are not too fussed.
“In cabs, the equal monthly installment (EMI) is steep and the drivers want to do rides. In autos, the EMI is barely Rs 2,000 a month. The auto drivers would refuse rides if they hit their personal daily target. They would switch off their apps at 8pm and go home,” says another former employee. He explains that sometimes the drivers would not show up to their pick up points in the afternoon because they fell asleep. “It was hilarious,” he says.
Singla decided he needed to amp up the volume so he tried to buy out Mumbai-based on-demand black-and-yellow taxi aggregator BookMyCab. The conversations went well. BookMyCab had the black-and-yellow market cornered in Mumbai. It had made inroads in Kolkata as well. The sale worked for Avinash Gupta, CEO, BookMyCab, who could make an exit. Singla could use it to garner volume and, more importantly, he could lay his hands on their tech. The deal was as good as done. It was announced in the papers and then it fell through.
“The Series B round was supposed to be $20 million. But investor confidence was evaporating quickly in Jugnoo,” says a source close to the deal. The fundraising stumbles continued for a while.
Singla got into a Twitter spat with Flipkart co-founder Sachin Bansal. Singla claimed he was approached by Bansal to invest in Jugnoo. Bansal refuted the claims.
The next round ultimately closed in April ‘16 at Rs 70 crore, with a majority coming from Paytm.