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IF you live in a metro city and want a radio taxi during the rush hours, chances are that you’d have to wait a good hour for it. The demand for radio cabs far outstrips their availability, as people are increasingly looking toward comfortable, affordable and safe road travel. In response to this growing need, Rajiv K. Vij decided to form an integrated passenger ground transportation company—with a play in the entire gamut of self-drive, fleet management, operating lease and radio taxi services.

“I come from a family of bureaucrats and educationists. Having done my graduation from Hindu College, I followed it up with a Post Graduation in Management from the Faculty of Management Studies, Delhi University. A major part of my initial working years were within the automobile industry,” Vij says. While at Hindustan Motors, he had the opportunity to interact with a lot of taxi operators. Through them, he learnt about the financial workings and business model they followed. “I developed a keen understanding of how things worked,” he says.

In 1995, Vij took on the post of Head of the Car Rental Business at International Travel House, an ITC group company. Not only did he become responsible for expanding and turning around the Europcar brand in India, he also hit upon a life-changing realization here. “I quickly realized that no company was looking at car rentals as its core business. I believed I would be able to build this business. So in 2000, when things did not work out [at ITC], I decided to jump into the business on my own. To get started, I put in personal and family money.

The initial business focused on car rentals for corporates, and then for the hotel business,” he says. Vij forged a partnership with the world’s largest car rental brand, Hertz, in 2001 and set up Carzonrent (India). The company was appointed Master Licensee for Hertz International in this region. “This industry is highly capital intensive—and I did not come from a business background.

Getting the initial capital was a challenge, as was getting the initial cars funded. Also, [striking] a relationship with an international brand like Hertz was not easy,” Vij says.  Eventually, he found financial support from banks. “The journey has been tough and interesting. It has been [especially] tough in terms of handling such a large workforce,” he says. But the pioneer has brought about a lot of scaleable and entrepreneurial changes when dealing with the workforce, especially drivers. “It’s very difficult to keep a tab on the drivers and cars when they’re on the road. To give them a sense of responsibility and belonging, we give the driver the car he’s been driving at the end of five years—at no cost. This way, the drivers care for the cars since they have a stake in them.”

While Carzonrent has been a runaway success, Vij has won accolades for his radio taxi business, EasyCab. All its services are underpinned by investment in the latest technology to make bookings easy and convenient using voice recognition software and the internet.

The radio taxi tariff is fixed at Rs. 150 per 10 km, and passengers are charged only from origin to destination. In addition, a night surcharge of 25 percent is generally levied from 11 pm to 5 am. “This service fundamentally makes a lot of sense for transportation in a city. At present, the number of radio taxis available in cities is not very large—people find it a challenge to get a vehicle. The demand is high,” he says.

According to Vij, purchasing cars is the easy part of the business; the main challenge is to increase the fleet with reliable, safe and high quality drivers: “In January 2007, we started operations with 250 cars. To find 250 drivers for these cars, we scanned 2,500 drivers, which means only one out of ten drivers were recruited.” Today, EasyCab operates 800 cabs in Delhi and 1,900 cabs pan India. And it is currently in the process of adding 2,000 cabs to its fleet. On a daily basis, these cabs service around 16,000 passengers.
Since its inception, EasyCab has done business worth Rs. 300 crore, and is expected to close at Rs. 20 crore this fiscal year.

The company’s target for the next fiscal year is Rs. 330 crore. “The potential of the market is huge, and we have a diversified portfolio,” says Vij. “[Ours is] a diverse revenue stream with a lot of sustainability built into it. SIDBI and Sequoia Capital are the two private equity firms that have invested in the company. In the next 2-3 years, we want to have a fleet strength of 25,000 cars and revenues of Rs. 1,000 crore.”

Vij says such a high growth rate can easily be sustained for the next 4-5 years. At present, this sector is worth about Rs. 600 crore. And it is estimated to hit Rs. 3,000 crore in the next five years.

©Entrepreneur February 2010

Tags:
car, EasyCab, radio taxi, Rajiv K. Vij, rental