Mobility startup SWVL shuts operations in Pakistan, its second biggest market

After three years of operating in Pakistan, mobility startup SWVL last week decided to wrap up operations in Pakistan completely amid a global downturn in investments.

Company sources disclosed to Profit that SWVL announced decision to shut down its intercity travel vertical in Pakistan on November 17 and laid off staff. On November 18, the company decided to completely wrap up its operations, shutting down the TaaS (transport-as-a-service) vertical. 

SWVL operated three business verticals in Pakistan. Individual riders could commute on SWVL’s buses for intracity travel under a retail model. SWVL’s retail bus service suffered a major blow initially during the pandemic when all transportation took a hit. 

Later on, the change in investor sentiment in the public markets forced SWVL to pause its retail service in Pakistan in June 2022. Under the other two verticals that have recently been shut, individual riders could take buses for intercity travel under the travel vertical. 

Under TaaS model, SWVL provided customised services for corporate clients such as businesses, schools, and other customers that operate their own transportation programs. Under this model, company’s offerings included access to Swvl’s business platform and technologies, consulting and reporting services, and use of the vehicles and drivers in their network to operate such transportation programs.

While the company did not give any reason for the shutdown, a source in the company said that the difficult decision of shutting down could be because of the global downturn in investments. SWVL had been following a high cash burn model and its financial position had been precarious. 

SWVL posted net losses of $161.6 million for the six-month period ending June 30, 2022, which had doubled over the corresponding six-month period of 2021. For the first six months of 2021, SWVL posted a net loss of $80.6 million. SWVL’s total accumulated losses as of June 30, 2022, were $375.8 million compared to $216 million as of December 31, 2021. 

The company was running negative operating cash flows of $76.8 million for the six-month period of 2022. According to the company’s financial statements, it had been funding its operations primarily with proceeds from the issuance of Class A Ordinary Shares. On March 31, SWVL received investments of $53.3 million and $111.5 million from the reverse recapitalization transaction and sale of shares to certain PIPE (private investment in public equity) investors to finance its operations. 

It subsequently received another $20 million investment, giving the company enough cash to keep it a going concern for 12 months. 

All of this, however, does not explain why SWVL shut Pakistan down completely despite Pakistan being its second-biggest market in terms of revenue. SWVL derives the bulk of its revenue from Egypt, Pakistan, Kenya, Saudi Arabia, Jordan, Argentina, and Turkey, out of the 20 countries it operates in.   

While layoffs have been reported across SWVL, no news of a complete shutdown in other countries has emerged yet. 

For the first six months of 2022, revenue from Pakistan was $9.71 million, contributing about 25% to the total $40 million in revenue for the period. The revenue from Pakistan had grown from $2.4 million in the first six months of 2021. Only Egypt tops with a revenue of $19 million for the first half of 2022. 

The company, however, did not seem to be able to turn profitability in Pakistan. Last month, SWVL announced that operations in only five of its 10 top countries by revenue, namely Egypt, Turkey, Germany, Kenya, and Jordan, turned adjusted EBITDA positive or breakeven in August 2022.

The company has been tracking the path to profitability and reaching a cash flow-positive stage by 2023. Mostafa Kandil, the CEO of SWVL, did not respond to request for comments on shutting down operations in Pakistan.