by Privcap
October 6, 2015

Tata’s ‘Sprawl’ is Uber’s Gain

A partner at the private capital division of India’s most trusted brand, Tata, explains why his firm invested $100M in Uber India.

One of India’s most trusted and established brands is helping pave the way for Uber to expand in the Southeast Asian nation, with a $100M investment.

Tata Capital—a division of Tata Group, which owns more than 100 of India’s biggest companies—made the investment through one of its private equity vehicles, the Tata Opportunities Fund.

Bobby Pauly, Tata Capital

“When we looked at the space and the opportunity presented itself, we thought, ‘Uber is not just a regional or a local market leader but a global market leader,’” says Bobby Pauly, the partner at Tata Capital who led the deal. “And for our fund, which leverages the network and sprawl of the Tata Group for the benefit of our portfolio companies, this was a very natural fit for us. We think we can make a meaningful difference to the outcome of Uber’s success in India.”

Tata announced the investment in August.

With competitors like OlaCabs, which claims to have 80 percent of India’s taxi market (providing some 750,000 rides every day) and enjoys a three-year head start, Uber is facing some healthy competition in the region. But according to Pauly, Uber is poised for substantial growth.

“Uber does have competition from other taxi-gating companies, as well as from other radio-taxi outfits,” says Pauly. “But that [being] said, Uber has been phenomenally successful in India thus far.” The ride-hailing service app has been in the country for a little less than two years, but Uber is already in 18 cities in India—the largest number outside of the U.S.—and has about 150,000 driver partners, with growth at about 40 percent month-on-month.

Pauly says: “It’s an astronomical growth with that number of driver partners, and it’s tracking close to 35 percent market share in the taxi-aggregating segment. So it’s a phenomenal run for Uber.”

The $600M Tata Opportunities Fund usually focuses only on businesses that are owned and operated in India, Pauly explains, but the Uber investment is a worthy exception in its portfolio of companies, which includes Tata Sky (a partnership with 21st Century Fox) and Roots Corporation Limited, which operates Ginger Hotels.

And while the Tata Opportunities Fund employs a mix of investment and operating partners, there are no plans to install any executives to help run the company or take a seat on the board of directors as part of the Uber investment.

“We do see ourselves being able to forge relationships and partnerships in areas where we think Uber can benefit,” says Pauly, noting that the Tata Group’s reach in business can help with the company’s supply chain, including insurance, the sourcing of drivers, the buying and financing of vehicles, and other corporate and retail partnerships. “Forging a commercially meaningful relationship between Tata entities and Uber could go a long way in changing the outcome of how Uber succeeds or does not in this country,” he says. “We can also help [Uber] in other countries where Tata has a presence.”

Pauly joined Tata Capital in 2007 as a founding member of the private equity team. He was assigned the Tata Opportunities Fund in 2010 as the first member of its advisory team. TOF is sector-agnostic and typically invests somewhere in the $30M–$200M range, taking a medium-to-long-term investment strategy.

Tata has experience in partnering with global market leaders and helping them integrate into India’s commercial market. Starbucks entered into a joint venture with Tata Beverages in 2007 and now boasts 71 locations in six cities. That sparkling reputation is what Uber is counting on as it gets set to invest $1B in India. (Uber also announced it will invest $1B in China.)

“The comfort of knowing that Tata is behind us as an entity goes a long way,” Pauly says. And while there is no timeline for an initial public offering from Uber, this is a likely capital exit strategy for the firm.

A partner at Tata Capital, Bobby Pauly, explains why the firm invested $100M in Uber India.

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