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India's booming taxi-app firms face problems

Mumbai - India's ultra-competitive app-based taxi-hailing market has quickly become a multi-billion-dollar industry, but controversy surrounding safety, rejected licences and protesting cabbies threatens to slam the brakes on its spectacular rise.

Domestic company Ola Cabs and US-based Uber are booming, fuelled by a rising number of professionals wanting an easy-to-book, clean and air-conditioned cab in India's rapidly growing and congested cities.

Ola spokesperson Anand Subramanian said: "We've barely scratched the surface. We need to be in every corner of India and it is a huge country, so the potential is huge."

Domestic competitor

But it hasn't been a completely smooth ride, with Indian authorities rejecting Uber and Ola's applications to operate in New Delhi, even impounding their cars, and both firms facing angry protests from traditional taxi drivers.

Ola Cabs has soared from fledgling internet start-up to the leader of India's smartphone taxi-hiring industry in just five years and is now worth an estimated $2bn.

It recently bought up domestic competitor TaxiForSure for a reported $200m and is also outperforming web and mobile app-based rival Meru Cabs in a crowded marketplace.

Private but often shoddy and uncomfortable cabs have long plied India's notoriously vehicle-and-animal-congested roads, filling a void created by patchy and unreliable public transport networks.

But in 2010, two young entrepreneurs in Mumbai - Bhavish Aggarwal and Ankit Bhati - decided that India's tech-savvy and wealthy middle-classes wanted the convenience of a comfortable ride with just a couple of clicks of their smartphones.

Delivering groceries

They founded Ola and started operating with only a handful of vehicles before increasing the number of cars on its network to 10 000, across ten cities, by last year.

An aggressive recruitment drive over the past 12 months has resulted in its operations rising more than tenfold and Ola now operates 150,000 vehicles in 100 cities stretching the length and breadth of India.

Ola notched 200 000 rides a day in January and predicts it will record over a million a day this month. They have also started to offer auto-rickshaws for hire and are to start delivering groceries too.

The companies were banned in the capital in December after an Uber driver was accused of raping a woman passenger in a case that sparked uproar.

But they resumed operations in January even though the government rejected their applications for a licence to operate.

Interest rates

Delhi's Ola and TaxiForSure drivers were given an reprieve last week when the High Court overturned the government's ban. Uber has now filed a similar petition in the court in the hope of winning a similar ruling.

The head of Mumbai-based Capital Portfolio Advisors, Paras Adenwala, said: "From a customer convenience angle, start-ups which deliver services at your doorstep on demand are great, but from an investor angle they do not appear to be that impressive since they do not give returns.

"Once interest rates start rising they are going to start facing money problems," he added.

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