| Experienced Leadership
EFPL was incorporated in October 2018 by Mr. Siddharth Ladsariya and Mr. Prihans Dedhiya. Mr. Siddharth Ladsariya, is a Computer Science Engineer & MBA from University of Rochester, USA. He is an Active Angel Investor with 150+ investments in unicorns like OYO etc. He has also been recognized by AsiaOne as 40 Most Influential Asians Under 40. Mr. Prihans Dedhiya, is a Management Graduate from Chetna College, Mumbai and has about 8 years of experience. The team is led by expert management and supported by experienced operations team which is a mix of Engineers, MBAs & CAs. With expertise and professional management EFPL has become the largest fleet service provider to Uber in India in four years of time.
Acuité believes that EFPL's seasoned Management will continue to benefit the company over the medium term.
Comfortable financial risk profile
The financial risk profile of the company remains moderate with moderate capital structure and comfortable coverage indicators. The company has undertaken a sizeable expansion in its fleet from 820 cars in FY2021 to 3160 cars in FY2022 which has led to increase in its debt. Its debt increased to Rs. 22.76 Cr. as on March 31, 2022 against Rs. 14.01 Cr. as on March 31, 2021. However, it has not led to any increase in its gearing as the company has raised funds to the tune of Rs. 7.75 Cr. in August 19 (by issue of CCPS), Rs.10.30 Cr. in January 2022 (by Rights issue), and Rs. 45 Cr. (by issue of CCPS) during May 2022. The net worth of the company has stood at Rs. 28.82 Cr. as on March 31, 2022 against Rs. 5.91 Cr. as on March 31, 2021. Gearing improved to around 0.79 times as on March 31, 2022 as compared to a high gearing of 2.37 times as on March 31, 2021. Going forward the company has aggressive expansion plans which will lead to substantial addition of debt in next two years. However, the EFPL’s capital structure is expected to remain comfortable given that EFPL has also raised funding. Going forward, the gearing is expected to remain around 1.20-1.26 times for FY23 & FY24. The debt protection metrics is comfortable marked by ICR of around 11.59 times and DSCR of around 1.81 times during FY2022 against ICR of 3.19 times and DSCR of 3.19 times in FY2021. Going forward EFPL’s ability to successfully scale up and stabilize its operations will remain a key for coverage indicators to remain stable.
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| Evolving business model and limited track record of operations
EFPL began with its operations in 2018 with 49 cars and gradually expanded it to 720 cars in 2020 and 820 cars in 2021. Out of the three years in which EFPL was fully operational, FY2021 was largely affected by disruptions related to COVID 19. After coming out of the lockdowns EFPL has aggressively expanded in the later half of FY2022 by increasing its fleet three times to 3160 cars and further to 4000 plus cars in Q1FY2023. EFPL has operated for a limited period post its large-scale expansion. It largely operates in Mumbai and with some presence in Bengaluru, Delhi, Hyderabd and Kolkata. It has expanded using three key models. Of the total revenue earned on a trip around 20 percent is charged as a commission by the cab aggregators for running the cars on their platform and rest is transferred to EFPL. Further, this gets divided in a 60:40 ratio between EFPL and its drivers. Driver payments are settled on a weekly basis and 60 percent of his every trip fare is transferred to him which includes CNG cost as well. Aditionally EFPL also has an operating lease model for retail HNI investors which offers them a fixed IRR or variable revenue payouts on a monthly basis. Accordingly, monthly rentals either fixed or variable are made to the investors as per the agreements which becomes an aggregation cost for EFPL. EFPL revenues of Rs. 81.27 Cr. during Q1FY2023, against Rs.109 Cr in FY2022 after stagnating at around Rs. 36 Cr. in FY2021 and FY2020. While its fleet has gone from 720 in FY2020 to 820 in FY2021 to 3160 in FY2022 and 4000 plus in Q1FY2023. Post expansion, its revenue per car has gone up to Rs 5.48 lacs in FY2022 from 3.87 lacs in FY2021. Going forward EFPL plans to further expand its fleet aggressively which will be partially funded by debt and rest through its off-balance sheet model. Its repayment obligations are expected to be in the range of Rs. 10 Cr. and around Rs. 68 Cr in the coming FY2023 & FY2024. EFPL’s ability to generate cashflows commensurate with its repayment obligations will be based on its ability to scale up its operations by maintaining adequate car utilisation, per car revenue & costs, driver retention & expansion and its relations with Uber. It will also be affected external by factors such as growth in vehicle sales taking away overall traffic from cab aggregators. EFPL has only been operating at this scale for the past 5 months and has a very limited track record of operation. Any adverse impact on the scale up and stabilization of operations will be key rating sensitivity.
Structural problems within ride hailing industry resulting in high attrition and unavailability of stable driver base and presence in price sensitive market exposing it to regulatory risk
Adding new drivers and retaining them remains challenging till date for the ride hailing industry given the unorganised and competitive market. Mostly cab aggregator companies prefer hiring drivers on contractual basis as it works out well for the companies. It can start operating in new markets easily and dont need to concern itself with employer-employee laws and the related responsibilities and obligations. Further, this gives drivers the freedom to work when they want, for as many hours as they want and also quit anytime leading to low driver to vehicle ratio leading to asset being under utilized. However, in an effort to reduce this gap, EFPL has created a driver centric operation which focusses on rural recruitment drives and driver referral alongside online recruitment portals. However maintaing a stable driver base for having adequate driver-vehicle ratio will remain key monitorable. Further, the operations of the industry are price sensitive and highly susceptible to fuel prices and other inflation inputs which may expose the company to regulatory risks.
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