LAHORE/ISLAMABAD: Ride-hailing giant Uber is in the process of raising an investment north of $700 million for Careem, which the company intends to use to scale the payments and delivery business under the Careem superapp.
Sources said that Uber is seeking upwards of $700 million investment for Careem, with some sources quoting that the investment being sought was as high as $1 billion. Japan’s SoftBank, one of the biggest technology investors in the world, is in the process of evaluating Careem for investment, said a source.
Profit reached out to Mudassir Sheikha, the co-founder and CEO of Careem, for comments but no response was received from Sheikha till the filing of this report.
Careem, which is currently wholly owned by Uber, is also likely to be spun off from Uber, giving greater decision-making control to Careem management while Uber will remain a shareholder. Careem currently operates under the centralized command of Uber after its acquisition of Careem in a $3.1 billion deal first announced in March 2019.
Uber’s acquisition of Careem was completed in January last year. A few months later, Careem CEO and co-founder Mudassir Sheikha announced the launch of Careem superapp.
According to sources, Uber’s centralised decision-making has not only affected Careem’s superapp ambitions but also the core ride-hailing operations. Rides have become expensive and there has been a shortage of riders as well as drivers.
Rides becoming expensive is a global phenomenon in the Uber ecosystem, however, in line with its strategy to turn the company profitable. This year, Uber had its first profitable quarter since its launch in 2009.
Within Pakistan, sources tell us that Uber implemented aggressive optimisation of P&L and ordered increasing EBITDA margins, previously negative, to about 10% in all markets of Careem. Consequently, captain subsidies were decreased resulting in a loss of supply and increased fares over time.
Our sources also said that Careem became profitable with this measure but at the cost of a reduced market share in ride-hailing. On the other hand, Russian ride-hailing company inDriver has been aggressively capturing the market once dominated by Careem and Uber on the back of zero-commissions charged to drivers.
According to a source in inDriver, the company recently hit a record 40,000 rides in a single day in Islamabad/Rawalpindi, which is about the same as Careem and Uber do in the twin cities.
Careem’s Pakistan head resigns
As Uber tries to raise funds for Careem, Careem’s General Manager for Pakistan Zeeshan Hasib Baig has decided to part ways with the company. Meanwhile, Ibrahim Manna, Careem’s managing director for international markets, would be taking over Zeeshan’s responsibilities temporarily.
In a statement to Profit, Madiha Javed, Careem’s communications head for Pakistan, said that Baig will serve at his position till December 31 this year. Baig, who is a Lahore University of Management Sciences (LUMS) alumnus and former management consultant, joined Careem in 2017 as operations manager.
Baig took over the role of general manager in August 2019 after Junaid Iqbal, former managing director of Careem, stepped down from his role to head the Careem Pay unit. Less than a month after taking over, Iqbal resigned as head of Careem Pay and parted ways with the company for good over alleged differences with Careem co-founder Mudassir Sheikha.
Baig is leaving to pursue other professional endeavors, according to a statement from the company. His departure from the company comes after many other key executives have left Careem to start their own ventures following the Uber acquisition.
Careem’s senior director of operations Talha Ansari left in June 2020 to start Retailo along with Muhammad Nowkhaiz, who was head of strategy at Careem, and Wahaj Ahmad who served as assistant general manager at Careem in 2017. Likewise, Mohsin Zaka, who was the general manager for Careem Pakistan until September this year also left to start Tazah along with co-founder Abrar Bajwa who was formerly senior director of operations at Careem.
Likewise, Sarmad Farooq co-founded Truck It In with Raza Afzal and Haider Navid. All three of them served at key positions at Careem. Careem executives are spread across different startups in Pakistan and the Middle East and their departure from Careem coincides with the difficult times for Careem in Pakistan with a decline in ride-hailing business and food delivery also not being able to make an impressive mark.