Uber has provided more than a peek into its business in the run-up to its hotly anticipated debut on the stock market. Though the cab-hailing company revealed strong growth, it also showed a long struggle to overcome huge losses and damage to its reputation. Nowhere is this more true than in India, where its growth has tempered by a string of reversals and a raft of potential risks. No wonder India does not figure in the company’s near-term priority list. That list comprises countries such as Argentina, Germany, Italy, Japan, South Korea and Spain. But India figures prominently in Uber’s initial public offering (IPO) filing. These are the main instances that the company has devoted space to India in the filing. You will see why.

1. Competitors Better Placed In Food Delivery

"Our competitors in certain geographic markets enjoy substantial competitive advantages such as greater brand recognition, longer operating histories, larger marketing budgets, better-localised knowledge, and more supportive regulatory regimes. In India, for example, our Uber Eats offering competes with Swiggy and Zomato, each of which has substantial market-specific knowledge and established relationships with local restaurants, affording them significant product advantages. As a result, such competitors may be able to respond more quickly and effectively than us in such markets to new or changing opportunities, technologies, consumer preferences, regulations, or standards, which may render our products or offerings less attractive.”

2. Risk of Driver Dissatisfaction

“As we aim to reduce driver incentives to improve our financial performance, we expect driver dissatisfaction will generally increase. We also take certain measures to protect against fraud, help increase safety, and prevent privacy and security breaches, including terminating access to our platform for users with low ratings or reported incidents, and imposing certain qualifications for drivers and restaurants, which may damage our relationships with platform users or discourage or diminish their use of our platform. Further, we are investing in our autonomous vehicle strategy, which may add to driver dissatisfaction over time, as it may reduce the need for drivers. Driver dissatisfaction has in the past resulted in protests by drivers, most recently in India, the United Kingdom, and the United States.”

3. The 2015 Passenger Rape Incident

“Drivers or carriers, or individuals impersonating drivers or carriers, engage in criminal activity, misconduct, or inappropriate conduct or use our platform as a conduit for criminal activity, consumers and shippers may not consider our products and offerings safe, and we may receive negative press coverage as a result of our business relationship with such driver or carrier, which would adversely impact our brand, reputation, and business. There have been numerous incidents and allegations worldwide of Drivers, or individuals impersonating drivers, sexually assaulting, abusing, and kidnapping consumers, or otherwise engaging in criminal activity while using our platform. For example, in December 2014, a driver in New Delhi, India kidnapped and raped a female consumer, and was convicted in October 2015.”

4. Investments in India

“Our business is substantially dependent on operations outside the United States, including those in markets in which we have limited experience, and if we are unable to manage the risks presented by our business model internationally, our financial results and future prospects will be adversely impacted. As of the quarter ended December 31, 2018, we operated in over 63 countries, and markets outside the United States accounted for approximately 74 percent of all trips. We have limited experience operating in many jurisdictions outside of the United States and have made, and expect to continue to make, significant investments to expand our international operations and compete with local competitors. For example, we have been making significant investments in incentives and promotions to help drive growth in India, a country in which local competitors, particularly Ola, Swiggy, and Zomato, are well capitalised and have local operating expertise.”

5. Risk Of Cash Payments

“In certain jurisdictions, we allow consumers to pay for rides and meal deliveries using cash, which raises numerous regulatory, operational, and safety concerns. If we do not successfully manage those concerns, we could become subject to adverse regulatory actions and suffer reputational harm or other adverse financial and accounting consequences. In certain jurisdictions, including India, Brazil, and Mexico, as well as certain other countries in Latin America, Europe, the Middle East, and Africa, we allow consumers to use cash to pay Drivers the entire fare of rides and cost of meal deliveries (including our service fee from such rides and meal deliveries).”

6. Risk Of Competition Laws

“Changes in, or failure to comply with, competition laws could adversely affect our business, financial condition, or operating results. Competition authorities closely scrutinize us under the US and foreign antitrust and competition laws. An increasing number of governments are enforcing competition laws and are doing so with increased scrutiny, including governments in large markets such as the EU, the United States, Brazil, and India, particularly surrounding issues of predatory pricing, price-fixing, and abuse of market power. Many of these jurisdictions also allow competitors or consumers to assert claims of anti-competitive conduct. For example, complaints have been filed in several jurisdictions, including in the United States and India, alleging that our prices are too high (surge pricing) or too low (discounts or predatory pricing), or both.”

7. Scrutiny Over Bribes

“We have operations in countries known to experience high levels of corruption and are currently subject to inquiries, investigations, and requests for information with respect to our compliance with a number of anti-corruption laws to which we are subject. We received requests from the DOJ in May 2017 and August 2017 with respect to an investigation into allegations of small payments to police in Indonesia and other potential improper payments in other countries in which we operate or have operated, including in Malaysia, China, and India.”

8. Risk Of Litigation

“We may be subject to pricing regulations, as well as related litigation or regulatory inquiries. Our revenue is dependent on the pricing model we use to calculate consumer fares and driver earnings. Our pricing model, including dynamic pricing, has been, and will likely continue to be, challenged, banned, limited in emergencies, and capped in certain jurisdictions. For example, in 2016, following the filing of a petition in the Delhi High Court relating to surge pricing, we agreed to not calculate consumer fares in excess of the maximum government-mandated fares in New Delhi, India.”

9. Potential Reduction In Margins

We also expect our Core Platform Contribution Margin to decline in the near term due to, among other factors, competition in ridesharing and planned significant investments in Uber Eats, based upon our long-term growth expectations for Uber Eats. Our Uber Eats Take Rate has declined in recent periods and may continue to decline, as we onboard large-volume restaurants at a lower service fee and restaurants with lower average basket sizes, and as we invest in more nascent and competitive markets, such as India.

10. Lesser Gross Bookings

“Gross Bookings in Latin America, India and the Middle East and Africa are lower on a per Trip basis compared to the United States and Canada, Europe, and Australia/New Zealand, largely as a result of pricing dynamics within those markets.”

11. Focus On Ridesharing Trips

“Ridesharing Trip growth outpaced Ridesharing Gross Bookings growth as a result of our expansion into markets with lower average Ridesharing fares, such as Latin America and India, which led to 18 percent decrease in the Ridesharing global average fare.”

12. Reduction In Driver Incentives

“Excess driver incentives increased in an absolute dollar amount as a result of growth in our business. However, excess driver incentives decreased as a percentage of Gross Bookings due to a reduction in incentive spend in India and for Uber Eats.”

13. Ola, Again

“While we believe that most successful businesses attempt to improve their profitability over time, we cannot predict whether or when other ridesharing category participants will focus on improving their profitability or whether they will reduce incentives as a means of doing so. Ridesharing category participants that offer incentives to consumers and drivers in the regions in which we operate include Lyft in the United States, Ola in India and Australia, Careem in the Middle East and Africa, and Didi in Latin America."

First Published:Apr 12, 2019 7:41 PM IST