Dubai transport start-up Swvl sees more customers ditch cars for buses

• Swvl operates a ride-hailing platform for private buses, similar to Uber’s model for taxis.
• Bookings have increased 40% year on year in the first quarter as commuters park their cars and take a Swvl. But the company slashed its headcount by almost a third in May while scaling back expansion.
• DUBAI: According to Swvl’s chief financial officer, Youssef Salem, higher oil costs have made it easier for the Dubai-based transportation company to draw consumers as more people choose buses over vehicles in some of its larger regions, such Pakistan and Egypt.
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To reassure investors in the wake of increasing inflation and interest rates, the Nasdaq-listed company has nevertheless aggressively cut expenses and put some corporate expansion ambitions on ice while it crafts a route towards profitability next year.

“The price of oil and inflation have two significant effects on us. One is highly encouraging operationally, and the other is quite difficult from the perspective of the capital markets, “Salem stated in a conversation.

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However, the corporation cut over a third of its workforce in May while slowing down consumer business operations in Jordan, Kenya, and Argentina. According to him, Swvl increased its rates by 10% to 20% during the previous four months in order to keep up with rising material prices.

Swvl offers a ride-hailing platform for private buses that is comparable to Uber’s model for taxis. This platform caters to individuals, businesses, and schools while providing more flexible schedules and routes than public transit.

After a merger with the only female-backed special purpose acquisition company (SPAC) Queen’s Gambit Growth Capital, which valued Swvl at roughly $1.2 billion, the business went public in April.

However, given the poor performance of many technological businesses and cryptocurrencies during the market turbulence preceding recent interest rate hikes, its share price has lost more than 75% of its value since.

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As cash flows in high-growth industries like technology are frequently highly geared toward the future and are lowered when discounted at higher rates, greater yields reduce their attraction.

The game has changed for technology firms, which have historically benefited from longer time horizons, according to Salem, who claimed that investor requirements in the current climate are clear and include free cash flow and shorter time horizons.

The money available for high growth stocks like ourselves becomes increasingly scarce and expensive as borrowing costs rise, he claimed.

“Instead of using more market capital if any market will not be successful by 2023, we need to close it down now and re-launch it in 2023.”