redBusA Million Dollar Baby Published On: Thursday, November 06, 2014 Views 10110


It is a human tendency to search for solutions when we come across problems rather than creating one but this wasn’t the case with the new generation who was beginning to make its way into the corporate world.  There was a time when internet barely had any existence and then at the same time the dot com bust took place shaking its every pillar of foundation. The ‘who’s-who’ went down the drains with this crash.

It was during that time a young boy at the age of 25 from Bangalore got an idea to get an unorganized bus industry, Organized.

It all began in the year 2005, when Phanindra a.k.a. Phani was working as a Sr. Designer with Texas Instruments, Bangalore. Phani planned to spend the Diwali with his family in Hyderabad but destiny had something else written for him. Due to Bangalore’s notorious traffic he couldn’t make it on time to book his tickets and unfortunately missed his bus. Frustrated! He came back. But this gave him a life changing idea!

He realized some key issues with the then-existing bus model and found internet as the best medium for solving these issues by putting together information on a platform where customers could access it easily and take better decisions.

So he shared his story along with the idea that he got with his friends and future cofounders Charan Padmaraju and Sudhakar Pasupunuri via email and after they came back, with a collective funding of INR 5 lakhs from their savings they started building a portal. This was the beginning of redBus! One of the rooms of the house they stayed in became their office.

Once it was ready, they went to different travel agents to get a tie-up for seats in the buses and after zillions of refusal on August 18th, 2006; they finally got their first five seats from a travel agent. “If you sell 5 seats in one week, its fine; if you don’t, don’t bother me again!” – were his words.

So in desperation they went out to market themselves and landed outside IT companies and distributed their redBus cards to the employees during lunch hours. On 22nd August, 2006, they managed to sell their first seat for Tirupati, to a woman who was working with Infosys and also managed to sell the rest of the four tickets within the five-day span. From here onward their business took-off!

Now at that time their whole concept was to create a software, sell it to bus operators and give the money to some NGO. But they were amazed to see that none of the bus operators were ready to take it for free also.

But in the year 2006, they got a major leap when they got selected for the TiE Entrepreneurship Acceleration Program. They gave them three mentors to advise them on what to do and how to start a business of their own.

These mentors helped them make their business what it was. They gave them assignments for every week wherein they had to do a market survey of the number of buses, the number of routes, the average price of a ticket, how people buy tickets, the profile of customers, how much commission a bus operator pays to an agent, etc. As a whole, they helped them get a generalized idea of the industry.

That was the time they suddenly became very famous and VC’s started contacting them. But as good students they asked their mentors for advice! Take the money and begin developing the idea – were their words! So they did!!!

Funnily, their initial asking was for INR 3 million and when one of the VC’s spent hours with them revising the plan, that figure multiplied to INR 30 million which was finally agreed on. And in February 2007, they got their first ever funding from SeedFund, which would be invested in a span of three years.

They very intelligently used the money to form the company, hire more efficient staffing and most importantly for setting up the official premises.

They slowly managed to grab the whole market, they now had 500 partnerships with bus and tour operators for 5000 routes. It covered 15 states primarily in South, West and North India and had also expanded to Central, North-East and East India. They also launched more packages to make it lucrative.

It now had 75,000 partner outlets and offers ticket booking services from the mobile via SMS and phone. It also delivered the tickets home and earned a gross revenue of INR 30 crore annually. At the same time unfortunately the 30 million they had raised, which was supposed to last for three years got over in one-and-a-half years. This is when they felt the pinch and decided to raise some more funds.

But now the scenario was different. The Lehman Brothers had collapsed and there was a global financial crisis. All the VCs who were interested once were not even talking to them. But luckily in July 2009, with a collective funding from SeedFund, Inventus Capital Partners & other unnamed investors, they managed to raise USD 2.5 Million.

They used these funds for the betterment of redBus and to strengthen its base. They also built a Software as a Service product short for SaaS for bus operators which handled licensing, upgrades and maintenance of the software and from here onwards redBus was no more just a “travel company.”

They now had 250 people working for them in 10 offices — Bengaluru, Hyderabad, Chennai, Coimbatore, Pune, Delhi, Vizag, Ahmedabad, Mumbai and Vijayawada. Along with that they also had seven physical call centers, three satellite call centers and tickets were home delivered in 10 places.

Their range was now increasing, so were their revenues. The company had grown 6x from the time of the initial round of investment but at the same time due to global crisis the valuation of the company went down.

But that didn’t affect them as the numbers spoke for themselves. Their revenue graph just went on increasing, they started off with a mere INR 5 Million revenue in FY07 with no profits, and directly jumped to INR 50 Million in FY08, followed by INR 300 Million in FY09 and finally a massive INR 600 Million in the FY10.

In May 2011, they raised another round of funding worth USD 6.5 Million with the help of Helion Venture Partners, Inventus Capital and SeedFund. But what was more shocking was that that year they also managed to make 3.5 Million Ticket Bookings.

Now that their accounts had sufficient balance to manage the business, they tied-up with state government services like Goa State Road Transport & Rajasthan State Road Transport Corporation and sold more than 10 million seats at a growth rate of 250% with intentions of International operations in Singapore and Malaysia.

With such immense growth and popularity redBus had managed to clock USD 120 Million in gross merchandise value in February 2013. This gave a big boost to their business value. But it didn’t stop them from betterment, as a matter of fact, redBus in partnership with YourBus and Asset Tracker launched real-tracking on their portal.


But with such speedy growth their thirst for more financial backing increased. And as per reports from Business standard in March 2013, they were on their final stages to raise USD 20 Million worth funds at an aggressive valuation of as much as 11 times their net revenue of close to INR 55 crore, thus valuing the company at USD 110 Million.

They also acquired a tie-up with Karnataka State Road Transport Corporation (KSRTC) to sell both state owned and private bus operators in Karnataka. Their reach had crossed all boundaries and was making its way to unmatchable success but the news they announced next shook everyone to the core.

In June 2013, redBus announced that they had sold the company to South African media giant Naspers through its Indian subsidiary, ibiboGroup, for around USD 120 million (approx INR 790 crore) at a gross merchandise value (GMV) of around Rs 600 crore. This was the biggest overseas strategic acquisition of an Indian internet asset.

A company that was named amongst the world’s 50 most innovative companies, alongside Apple, Facebook and Google by business magazine, started with a boom ended with a boom.

In April 2014 it was reported that redBus launched hotel booking powered by ibiboGroup’s back end infrastructure on its website followed by redbus teaming up with Uber (an on-demand cab transportation application) to offer free rides to bus stops in August 2014.


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