White-collared professionals in Mumbai who are familiar with Cityflo, a Lightbox Ventures and India Quotient-funded premium bus services will soon be able to enjoy more services as the company has plans to significantly expand its operations in the financial capital of India as well in Delhi.
The operator has plans to expand its fleet size to over 1,500 buses from the current 150-170 buses by the end of FY23. It has also targeted a 10-fold growth in its revenues over a year's period within two cities-Mumbai and Delhi, the company's top leadership told Autocar Professional in an interaction.
The company has so far raised approximately Rs68 crore and presently the fleet undertakes more than 5,500 monthly rides ferrying over a lakh people across 17 routes.
Taking cues from the aviation industry, Cityflo buses offer comfort to commuters not only with large windows, abundant legroom but also with recliner seats that can be adjusted to 37-40°.
The business model of the service provider is somewhat similar to Indigo airline, says Jerin Venad, CEO, Cityflo. Venad says 60-70 percent of the revenues come through subscriptions and with over 60,000 new sign ups recorded during the previous financial quarter. With almost no marketing costs, the growth potential is significantly higher for the number of buses that Cityflo is currently operating.
Jerin revealed to Autocar Professional that Cityflo operates on an asset-light business model and considers itself primarily as a bus company than an aggregator or marketplace because of its value-added partnerships with bus operating partners. These partners are part of the profit-sharing model and the operator is compensated even if the bus is not fully occupied.
All the operators who sign-up with Cityflo have to adhere to the make and type of buses, its design layout, services and punctuality amongst other criteria. So far it has worked well.
How the Cityflo business model works
Adding 1,500 buses to any fleet and managing business is not a deal for the faint-hearted. Such an acquisition requires a lot of money and manpower. Since the aim is to do al this in 2-3 months, strategists at Cityflo will use the follow this model for their rapid expansion programme.
Instead of going for outright purchases of buses that will involve capex, the expansion is primarily planned through onboarding of more bus operators and/or inducting more buses from existing operators.
A single unit of Mercedes-Benz may approximately come at a cost of close to Rs 1 crore. However, bulk purchases facilitated through companies like Cityflo may help in getting significant discounts for the bus owners.
The deal with the bus operator partner is based on profit sharing. The operators are offered a fixed monthly pay out based on contract or arrangement.
The new buses once inducted will cover unrepresented routes also. Currently, BKC in Bandra (east), Andheri (east), Lower Parel, Dadar are some of the major corporate business-centric locations that are included in the routes.
Cityflo uses only Mercedes Benz buses. Currently all its buses run on ICE. Though there are no immediate plans to induct electric or CNG buses, it may be looked at some time in future.
Though there are no upfront costs for Cityflo for expansion of its fleet, however, it may raise more funding for expanding its staff strength, upgrading on technological and operational fronts, amongst others.
It is estimated that almost 30 million people in India earn their living from bus services directly or indirectly and 90 per cent of them are from the private sector.
Customers can book and cancel the journey using the company's smartphone app.
Mumbai civic authority run BEST is also planning to run similar levels of bus services along the busy corporate corridors during peak hours. Cityflo could face strong challenges from other rivals like Shuttl, Kammute besides BEST.