Ride-hailing startup Pathao and fintech startup SureCash have entered into a discussion of merger that, if approved by both boards, would create an interesting company at the intersection of ride-hailing and fintech, The Daily Prothom Alo reports, citing unnamed sources.
The report says that the companies will continue to operate independently after the merger. The companies think that a merged entity would be better positioned to attract investment and provide a greater number of services to customers.
There was no official confirmation from the companies. Future Startup could not independently confirm the news.
Why it matters: Scale is important in the digital consumer tech space. While Surecash and Pathao both have a sizable user base independently and have strong operations in place, both companies struggled to raise capital in the past, a common scenario in Dhaka’s tech ecosystem owing largely to an underdeveloped funding ecosystem.
At the same time, competition has made ride-hailing, food and other businesses investment heavy for Pathao. The competition has intensified and does not show any sign of cooling off anytime soon. Moreover, a series of misfortunes in recent times has cost Pathao significantly both in terms of reputation as well market share.
In fintech, the scenario does not look any better for SureCash. bKash, which has strong backups from Alibaba and others, has been super aggressive both in MFS and mobile payment market. There is now a long list of fin-tech players trying to own-up part of the fin-tech pie.
SureCash CEO Shahadat Khan has many years of experience and has deep experience in tech. Pathao has an able management team. Both companies have come this far from almost scratch and weathered many challenges in the past. They should be willing to take chances to win a rapidly changing market. Nevertheless, tech mergers have a history of failure. And in Bangladesh, there is little history of tech mergers. There is one in recent years, Robi and Airtel and it seems to be going pretty well.
What to watch: The companies have just started the discussion and the discussion is still at an early stage, the Prothom Alo reports. There are a number of stakeholders involved. Pathao and SureCash both have multiple investors. Strategically a merger between these two companies makes sense as far as the ambition of both companies goes. Both boards are likely to approve. Second, the question of who would be leading the new entity remains and how regulators going to respond is also an important aspect.