Case

Editor’s Introduction 171

The Journey of Redbus Asian Journal of Management Cases

8(2) 171–188
© 2011 Lahore University of
Management Sciences
SAGE Publications
Los Angeles, London,
Rakesh Gupta New Delhi, Singapore,
Washington DC
Ajay Pandit DOI: 10.1177/097282011100800205
http://ajc.sagepub.com

Abstract
E-ticketing in India has experienced tremendous growth in the last few years and has become a common
and popular tool for booking airline and rail tickets. However, nobody thought it could work for bus
reservations considering the fragmented nature of this segment. It was not until Phanindra Sama (Phani)
felt it to be a huge customer dilemma, which could become a potential business opportunity. It was in
the month of October 2005, when Phani decided to go home from Bangalore to Hyderabad to spend
time with his family on Diwali—a major Indian festival. When he went to the bus stop to buy a ticket,
he found that there was no ticket available as buses were running full on account of festival season.
The agent had suggested that Phani contact other agents to find out the possibility of getting a ticket
from one of them. Phani was extremely disappointed—he could not spend Diwali with his family. Yet,
it also made him think; why weren’t there other ways to find out about the availability of bus tickets
rather than running from agent to agent? Phani wondered why one simply could not book a bus ticket
online—just like airline and railway bookings were made via the Internet. In this question lay Phani’s
answer. Thus, Redbus was born.

Keywords
Ticketing, business opportunity, fragmented segment, business model, India

Introduction
‘Sorry, no more tickets left.’ These were the words that kept ringing in the ears of Phanindra Sama
(Phani) while returning empty-handed after trying his best to get a bus ticket from Bangalore to Hyderabad
to join his family to celebrate Diwali, a major Indian festival.
Like thousands of young engineers who had moved to Bangalore to pursue job opportunities and were
planning to return home to celebrate the festival, Phani had also decided to go home for a few days in
October 2005. Since the plan to go home was made at the last minute, all the trains were full; so, Phani
decided to go via a bus.
When he went to the bus stop, Phani was unable to get a ticket as all the buses, just like the trains,
were full due to the heavy rush on account of the festival season. Various agents suggested that Phani
check with other agents to explore the possibility of getting a ticket. This struck Phani as odd and he

This case was prepared by Rakesh Gupta, PhD Scholar, Faculty of Management Studies, University of Delhi, and
Ajay Pandit, Professor, Faculty of Management Studies, University of Delhi, to serve as basis for class discussion
rather than to illustrate either effective or ineffective handling of an administrative situation.

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172 Rakesh Gupta and Ajay Pandit

wondered why this was the case with bus travels. He thought, ‘If you try to book a flight or a rail ticket,
an agent would tell you whether a given train or airplane is full, and if not, the agent can sell you a
seat.’
Phani thought hard. He was determined to find a way to overcome this problem and enquired from
many agents, asking them how the system worked and why one agent might have a seat available while
another did not. Phani soon learnt that there were thousands of agents across the country and each agent
would normally sell tickets of a few bus operators. This resulted in the customer going from one agent
to another, hoping that a ticket might be available. It was a rather tedious experience. Nobody aggregated
all the tickets to a particular source, and the fragmented nature of this segment meant that no single agent
knew about the availability of tickets once he was sold out.
Later, Phani discussed this issue with his friends, and that he was keen on finding a solution. Six of
Phani’s friends got excited about the idea—they even started debating over possible company names.
However, with the passage of time, four of Phani’s friends went their separate ways; leaving behind
Phanindra Sama (Phani), Sudhakar Pasupunuri and Charan Padmaraju—all classmates from the Birla
Institute of Technology and Science (BITS), Pilani—who were still passionate about the idea and decided
to take it forward.
Phani was an Electrical Engineer working with Texas Instruments while Sudhakar was an Engineer
with IBM, and Charan was working with Honeywell. They agreed to form a company named ‘Pilani Soft
Labs Pvt. Ltd’ to develop the idea into an enterprise. The name ‘Redbus’ was chosen after a lot of
discussion—they were convinced that the name should be simple. While studying at the Birla Institute
of Technology and Science, the friends used to go to Pilani via Delhi where the redline and blueline
buses ply. The initial thought was to name their company ‘Redline’, but the name was already regis-
tered; yet they decided to use the word ‘red’ in the name as it symbolized energy and passion. After a lot
of thought, they decided to add the suffix ‘bus’ as it would help the customers to connect with the
business.
It was a great time to live in Bangalore. This was because, at that time, India had emerged as a major
hub for outsourcing of services work from various parts of the world, especially in the field of Information
Technology (IT) and Information Technology Enabled Services (ITES)—and Bangalore was its undis-
puted leader. A large number of global majors had already established their development centres and
back-end operations in India, especially Bangalore, and a host of Indian IT companies had emerged on
the scene. This created a huge demand for skilled technical professionals. The culture was great and
Bangalore became a breeding ground for young entrepreneurs in the IT sector—those who were happy
with their jobs but still wanted to do something of their own.
At the same time, the Internet usage within the country was growing rapidly; even though the country
had a low Internet penetration rate, the absolute number of Internet users was high.
India had 81 million Internet users and was ranked as fourth in the world in terms of number of
Internet users after China, America and Japan (Figure 1).1
Within India, Maharashtra, Tamil Nadu, Karnataka, Andhra Pradesh and Delhi were the leading states
in terms of Internet users. The rising Internet connectivity had encouraged the growth of the E-commerce
industry and a large number of new companies emerged especially in the services sector whose business
models revolved around E-Commerce.
Though Phani came from a predominantly agricultural family, he had the ambition to venture out on
his own. Phani was born in rural Andhra Pradesh and moved to a boarding school in Kindergarten—this

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The Journey of Redbus 173

Figure 1. Major Users of Internet across Countries (millions)

Source: Internet Worldstats by Miniwatts Marketing Group.

early move made him more independent. He always fantasized about electrical motors and had thought
of only one career for himself: to be an Electrical Engineer. Phani had stated: ‘I had been an Electrical
Engineering wannabe throughout my childhood, so I trained to design microchips.’

The Initial Idea

The three partners started travelling and interacting with bus operators and agents to understand the
market dynamics and requirements. Discussions with bus operators persuaded Phani that a third party
was needed to change the system. They figured that most operators were small players who did not know
anything about technology, and that travel agents were even smaller players who did not care at all about
technology. So, Phani thought it would be a good idea to build an IT-based system for operators.
As they started reaching out to more operators, the enormity of the task struck them. Besides, the
response was mixed; few were encouraging while most were dismissive. Getting operators to update
their inventory to make real-time seating information available to customers would be a Herculean task.
It would be impossible to convince the operators and agents to buy software and hardware to run the

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174 Rakesh Gupta and Ajay Pandit

system. The idea was to build what would be an inventory management system for bus operators, which
would help operators, manage their inventory better, help the potential customers book tickets in advance
and also buy return tickets.
The three friends started working on this software part-time while continuing with their respective
day jobs. They were not sure whether this would work or not, however, the one thing they were clear
about was that the solution should help the customer, the operator and the agent.
This was not an aggregator system like the airlines where each airline had a system that would com-
municate the inventory situation to the Global Distribution System (GDS) and the ticketing agent could
then avail data from the GDS and do the booking as a result. Here, bus operators had no systems—forget
real-time inventory—and this came as a huge setback to the group.
But this did not deter Phani who kept mulling over possible solutions:

I believed that the operators would benefit because they couldn’t scale up their distribution, which was manual
and were turning away customers. They would have a chance of reaching out to a larger customer pool, and
serving their customers better if they used this system. Most agents represented only two or three small operators,
so they would see the benefit of having more seats.

Mentoring
Meanwhile, the Bangalore chapter of The Indus Entrepreneurs (TiE) was running the Entrepreneur
Acceleration Programme (EAP) for entrepreneurs. Phani had been attending TiE events and meetings for
some time and was aware of the programme. TiE used to invite proposals, review them, create a shortlist
and then ask interested individuals to present their ideas to a group of TiE members who had venture
investing experience. Some of these ideas would be selected for mentoring and money would then be
raised from venture funds or private individuals.
Phani and his team presented their idea before the TiE team to be a part of the EAP. After the pre-
sentation, Kiranbir Nag, the Vice President of SVB India Advisors who attended the presentation, asked
the team to get in touch with him.
The team had three meetings with him after which Kiranbir, Ashok Yerneni and Sanjay Anandaram,
who co-chaired the EAP at that time, became mentors to the team.
TiE adopted the venture in July 2006, and the reason for its selection was the team’s passion and
potential to scale up the venture as they were attacking fragmented space (Tables 1 and 2). To Sanjay,
this seemed similar to how online travel portals were working but felt that people were not focusing on
this segment, even though it could be a much bigger opportunity. The mentors made a commitment to
meet the group every week. The mentors gave the team various assignments such as carrying out a mar-
ket survey, identifying customer preferences and gathering market data. Through this, the team developed
a basic understanding about the segment such as the following: the number of buses, number of routes,
average price of a ticket, how people bought tickets, the profile of customers and how much commission
a bus operator paid to an agent.
Sanjay was instrumental in getting the team to think clearly about what they wanted to achieve and
what problem they wanted to find a solution for. He made them realize how difficult it would be to

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The Journey of Redbus 175

Table 1. The Fragmented Nature of Market

Fleet Size Market Share (%) Percentage (%) of Operators

Less than 20 buses 65 91
Between 20 and 75 buses 25 06
More than 75 buses 10 03
Source: Company documents.

Table 2. Market Profile (Geographic)

Group Market Redbus Presence

Group I: Andhra Pradesh, Gujarat, Karnataka, Maharashtra, 55% (~11K buses) Offices in all 5 states
Tamil Nadu
Group II: Delhi, Goa, Kerala, Madhya Pradesh, Rajasthan 35% (~7K buses) Office in Delhi; setting up
offices in other 4 states
Group III: Rest of the country 10% (~2K buses) No current presence
Source: Company documents.

deploy software for operators in remote areas and ask them to buy hardware to run the software. The
problem was that people were neither getting tickets nor were they sure whether they had exhausted all
other options to get a ticket.

The Birth of Redbus

The team went back to the drawing board: they realized that the solution was to build a portal, which
would provide the facility of booking tickets online. Therefore, they decided to shelve the idea of building
an inventory management system and started working on the website. That is how Redbus was born,
India’s first online bus ticketing portal, founded in August 2006, by a group of three friends. The core
proposition of Redbus was a centralized ticketing system, a concept that had been used for airlines and
railways but no one (except Redbus) thought it would be feasible for bus travel.
Redbus launched its service on 18 August 2006, with US$10,000 from the savings of the three par-
tners. One room of their house was converted into an office where they began working. They started with
one operator who gave them one week to sell tickets on the Internet, though this was too short a time for
any new medium to work.
The team began by visiting various bus boarding points in Bangalore, informed people about the com-
pany, distributed their business cards and asked them to call if they wanted a seat. That was how the
group did their marketing in the beginning.
The entire Redbus website was designed and developed by the founders, though none of them had any
experience with web technology as each individual had come from an Engineering background other
than IT. They purchased books to learn technology and started from the basics of computer programming.
The team decided not to outsource website development even when they had no experience to build it as
they felt it was too central and critical to their business, and if they had to be successful, they needed to
know the core of their business.

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176 Rakesh Gupta and Ajay Pandit

By this time, all of them had left their jobs and were fully committed to Redbus. However, one
problem—which delayed the launch of the venture by a month—was that none of the banks were ready
to provide them the payment gateway. It was the first time the banks came across a site which would sell
bus tickets and the founders did not have a running current bank account to show their financial
credentials.

Testing Times
The initial days were very tough as all three friends had given up their jobs and invested their savings
into Redbus. As Phani reminisced:

Those days were full of emotional hurt. We were used to being pampered in our jobs where even the smallest of
our requests, like choosing a seat under the A/C vent, was catered to. Moving from this environment to visiting
bus operators was a huge change. Here was a bus operator who would make you wait for hours to talk to you
once. This was the real test of our ego.

Phani always valued his personal space and lived alone in Bangalore, even though all his friends lived
in a shared apartment. However, as they gave up jobs, Phani moved in with Sudhakar and Charan to save
money. This was a time when they cut out all extra expenses.
As the website was being built, it was important to get more and more bus operators on board. It was
like walking the thin line between acquiring inventory from bus operators and pulling in customers to
buy tickets as one would not come without the other. The task required extensive networking and meeting
with bus operators and convincing them to sign up. The team unanimously decided that Phani would
look after this aspect of business while the other two would focus on technology and website-building.
The idea was new and it took time for bookings to start and the sales were slow to pickup. A typical day
started with taking calls from customers—this was another humbling experience for the founders as
many times people would call up, harass and sometimes even abuse.
The team started delivering the tickets themselves as well. Once, they had to deliver tickets at the
IBM office but Sudhakar refused to go inside fearing someone would recognize him as he used to work
at IBM. The founders stood outside the gates of big companies handing out pamphlets to young pro-
fessionals who were their target audience. They would also distribute pamphlets at bus stations to educate
people about the venture. Customer by customer, operator by operator, the Redbus team built their
business.
Finally, one journalist, impressed by the venture, interviewed the founders and profiled Redbus—
giving the company initial visibility. It took a while to take bookings to a significant level where bus
operators started realizing their capabilities. Slowly and steadily, more and more operators signed up.
Almost every bus operator who signed up with Redbus during the initial days believed that the venture
would shut down in a few months. However, it worked and none of the bus operators withdrew from the
partnership till date. Initially, the operators thought of Redbus as just another channel to sell their tickets.
Phani said, ‘We were just another agent for them. They paid us commission, just as they paid other
agents. We didn’t add any mark-up because the reason we started the venture was to help customers find
tickets, not to raise prices for them.’

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The Journey of Redbus 177

Even though the operators saw them just as an online distribution channel, the founders were very
clear about Redbus’ value proposition, which was superior customer experience. Even though most
agents thought of Redbus as a rival, the agents started using their service as a last resort to get tickets for
their customers. The whole idea behind the venture was to create an efficient and professional player in
this unorganized segment, which could make bus travel, especially the ticket-buying process, a smooth
and hassle-free experience for the customer. Their idea was to partner with the operators and agents by
way of providing a wider reach and choice to operators to sell tickets, and make available a larger
inventory for the agents to sell. Therefore, Redbus wanted to create a win-win equation for all of its
stakeholders.
As Sanjay had stated:

There was consumer demand for quality customer experience with bus travel, which had been an unsophisticated
and messy experience. We thought if we could drive a consumer brand that promised a good experience, operators
would eventually become part of the system and would give access to their inventory.

Industry and Competition

India’s road travel segment was estimated to be around US$3 billion in size by 2008; it was highly frag-
mented and was dominated by small operators and could hardly boast of any technology-enabled services
(Indian Brand Equity Foundation 2011).
There had hardly been any change in this industry since its major growth in the 1970s and 1980s. The
segment was highly unorganized with more than 2,000 private bus operators running around 20,000
buses on the long route.
The buses on the long route were called ‘contract carriages’ for which tickets had to be bought in ad-
vance. The buses on the short route were called ‘stage carriages’ where commuters bought tickets in the
vehicle itself.
There were very few operators who had a large fleet of a hundred buses or more, whereas a large
number of small operators had five to ten buses. Most of these operators were regional players who did
not have a country-wide presence, and given the scale of their operations, it was no surprise that they did
not offer computerized reservations. With the roads getting better and increasing income levels, the
coach segment (air-conditioned bus) was witnessing a rapid growth since 2008 and players like Volvo,
Mercedes and other luxury bus manufacturers estimated an annual growth rate of 40 per cent for this
segment in the next ten years (Sachitanand 2010).
As Phani pointed out, ‘The per capita consumption of air-conditioned buses in India is 1 per 100,000,
compared with 10 per 100,000 in China, 60 per 100,000 in America and 180 per 100,000 in South
Korea.’
The trend of E-ticketing in India was catching up and had experienced tremendous growth in the last
few years; it accounted for 40 per cent of airline ticket sales and 30 per cent of railway ticket sales,
whereas regarding bus travel, it had only just begun. Online channels had outpaced the total travel mar-
ket growth and constituted 23 per cent of the total market. Within the online segment, the big players like
airlines, railways and large operators (direct channel) dominated the online reservation with a market

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178 Rakesh Gupta and Ajay Pandit

share of 65 per cent, while online travel agencies had increased their share to 25 per cent from 7 per cent.
This growth was at the expense of traditional travel agencies whose share had declined from 32 per cent
to a mere 10 per cent. The traditional agencies neither had the scale and financing nor the brand equity
and know-how to compete with the venture fund backed start-ups and subsidiaries of the multibillion
dollar international conglomerates.
The rapid growth of Redbus was too glaring to be missed and competition started making its entry.
However, Redbus’ founders did not see this as a threat as there was a huge untapped market and that the
entry of professional players would further organize the market.
Redbus faced competition from Ticketvala.com and Indiabusticket.com and a few other players but it
had the first mover advantage. Ticketvala.com was initiated by the former Chief Technology Officer
(CTO) of World Span, a well-known name in the travel industry. The company raised five times as much
venture funding as Redbus but soon realized that it was a tough proposition. The company’s model was
to provide software to operators, integrate them into an online platform and then launch a front-end and
make money. They and others had to spend lot of capital to build software and convince operators to get
it installed and offered tickets for free to get consumer traction but this model has not worked for them
yet.
Operators were more concerned about selling tickets than having an efficient back-end, though the
scenario might just change in future.
Traditionally, in this segment, due to the huge network effect, Redbus being the largest player gained
a lot of traction from consumers and suppliers. The operators were coming in at competitive rates because
Redbus had the largest number of consumers, whereas none of the competitors had this much consumer
traction. Earlier on, Redbus invested and worked on the consumer side by launching their website to
attract customers, which in turn helped them in building their inventory. This was how they built huge
traction in the market, which would be very difficult for the competitors and other start-ups to gain
(Table 3).

Table 3. Redbus and Competition

Approximate Percentage Provide

Pan India Ticket Inventory Share of Web Distribution Software to
Company Presence at Anytime Traffic (%) Partners Operators
Redbus.in Yes 500,000 70 Maximum Minimal
Ticket Vala.com Yes 50,000 15 Minimal Yes
Via world Yes 25,000 7 No Yes
Abhi bus No 6,000 2 No No
Ticket goose No 5,000 2 No No
Customer Needz No 5,000 2 No Yes
Ticket Karan No 5,000 2 No No
Source: Company documents.

As Prof. Majumdar from the Tata Institute of Social Science had pointed out:

At the surface level, the Redbus model seemed to be very easy to replicate but getting this scale of operations was
very difficult. The aggregation capabilities and operational efficiencies of Redbus were their competencies.

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The Journey of Redbus 179

Redbus had always focused on excellent customer service and lower costs; therefore, the operators
were satisfied working with them.
It would be difficult for competition to replicate Redbus’ success because Redbus had kept its business
model simple. It would have been easy to complicate the model by trying to add more avenues to it such
as value-added services, but Redbus has consciously tried to avoid these temptations.
Redbus did not work with the State Transport companies even though it would have given them more
visibility and helped them build inventory because these companies offer very little commission.
As stated by Phani, ‘The competition may have been able to imitate our business model, but they
couldn’t copy our DNA.’

Fund-raising
Once TiE selected Redbus as one of the three ideas out of three hundred for mentoring, it became a major
discussion issue within the investor community in Bangalore. This led to various Venture Capitalists
approaching Redbus to fund their venture as the online travel segment was a very hot option.
Redbus’ mentors advised them to go with an early stage fund that would not only invest money in
their venture but also guide them in building the venture; so they selected Seedfund, which invested
US$500,000 in Redbus, and partner Bharati Jacob (of Seedfund) became a member of the Redbus
board.
The initial ambition was to build a company worth US$2 million, which Phani attributed to an Indian
TV series ‘Kaun Banega Crorepati’.2
During discussions with Seedfund about how much capital was really needed, their initial calculation
was US$60,000 to grow the business to US$2 million. In the meeting where Redbus presented this pro-
posal to Seedfund about the funding requirement, they asked the Redbus team to come up with a realistic
plan.
After the revised plan was prepared where one of the partners from Seedfund worked with Redbus,
they realized that they needed US$500,000 to execute the plan.
Phani was sceptical whether they really needed that much money and consulted Sanjay, who advised
them to take the money. Even though Phani was half convinced, he decided to go ahead but thought they
would never spend that much money. The plan was to spend this money in the next three years but the
entire amount was in actuality spent in one and a half years as Redbus saw robust growth; therefore, the
money was used in scaling up the operations, increasing the employee base and the setting up of regional
hubs and call centres.
This led to another round of funding in July 2008, where Inventus Capital, Helion and Seedfund par-
ticipated. Seedfund showed its confidence in Redbus by injecting an additional US$700,000 in capital in
the second round, in which Redbus raised US$2.5 million. The funds were used to scale up the hardware
and software to make the system powerful to handle increased traffic and to expand Redbus’ physical
presence; Bangalore was the company’s first office and corporate headquarters.
A few months later, a second office was established in Hyderabad. Soon after, offices came up in
cities like Chennai, Mumbai, Delhi, Pune and Ahmedabad and three more cities in the South.
This aided Redbus to further increase the number of bus routes and tickets on its platform while ex-
panding its geographical footprints. The infusion of funds led to further scaling up their capabilities and

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180 Rakesh Gupta and Ajay Pandit

the company experienced positive growth. The Redbus business model ensured that money was coming
in everyday, which built their financial strength. The founders had no qualms in admitting that Redbus
would not have grown as fast as it did without the funding. In all, Redbus raised US$3 million so far from
Inventus, Seedfund and Helion but since they had become profitable from December 2009 onwards, they
had not used the entire money raised in the second round and still had US$1.5 million left in the bank.
As per Bharati Jacob, the Managing Partner at Seedfund, and the first Venture Capitalist to invest in
Redbus:

Given the amount of capital it had used and the scale it had achieved, Redbus was the most capital efficient
company in the Indian travel industry. The company had built an excellent brand with a marketing spend of only
US $250,000, which was a fraction of the marketing spend of other online travel players.

Inventory Aggregation
To start with, Redbus adopted an old practice that had long predated computers: block booking. Phani
started signing up bus operators, and initially to encourage the operators to get on board, would ask them
to reserve five seats on a route for Redbus and their site would show these seats as open tickets.
They asked operators to reserve inventory until three hours before departure time, just as offline travel
agencies reserved a fraction of a hotel’s rooms in advance. Everyday they would call up the operators at
a designated time to tell them whether the seats had been sold or not and in case they managed to sell the
seats, they would call them for additional seats. Then operators were encouraged to sell 20 per cent of
their tickets through Redbus as buses selling tickets through traditional channels usually ran at 80 per
cent capacity.
This model helped Redbus scale up much faster in terms of the number of operators they got on board
in a shorter time span than any system-based model would have. This is because the system-based model
would have required operators to invest in software and hardware which might not have been feasible for
the operators.
Recalling the challenge of building inventory in the initial days, Charan said, ‘Our pitch to operators
was that the internet is the medium of the future but there was tremendous resistance to change, and we
were the new kids on the block.’
After proving the efficiency and effectiveness of Redbus’ services, the team negotiated a contract to
sell a greater percentage of tickets. The company’s technology team aggregated ticket inventory into the
Redbus server. The inventory aggregation process differed depending on the type of bus operator, as
most of the bus operators had not computerized their ticket reservation systems. Redbus could not simply
tap into their existing systems to put seats online.
To ensure a consistent increase in inventory, Redbus’ business development team developed a strong
relationship with bus operators and while doing this, they distinguished their services from travel agents.
In return for establishing a partnership with them, the operators were given enhanced customer service,
transparency and the benefit from Redbus’ extensive distribution network, yielding greater sales.
Further, working with Redbus allowed the operators to easily alert customers of any changes (for
example, fare and timetable changes, cancellations, additional seats available, etc.). Overhead costs for

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the operators were reduced (simplified logistics) through working with a single player with wide reach—
as compared to working with numerous travel agents. Currently, Redbus works with close to 700 oper-
ators, out of which 300 have fully automated their ticketing systems. Some operators now rely exclusively
on Redbus to sell 100 per cent of their inventory.
The Redbus server directly connects to the servers of these operators and continuously updates its
inventory. These operators account for 60 per cent of the Redbus inventory, whereas the other operators
rely on manual ticketing systems. Redbus holds in between 20 per cent and 100 per cent of tickets from
these operators to sell until three hours before departure, at which point it releases unsold tickets back to
these operators.
Redbus plans to capitalize on the first mover advantage by increasing their penetration further.
Recently, they have tied up with the Raj National Express and now the entire fleet of Raj National
Express is open to them as their bus tickets are available on their network. In contrast to the venture’s
early days when they had to persuade operators, one by one, to provide inventory, today, operators
contact Redbus and show keenness to join their network because Redbus has become India’s largest bus
ticketing company. By February 2011, Redbus had sold 3 million tickets.

Revenue Model
Tickets were sold online, through call centres and various sales channels (for example, post offices, con-
venience stores, online travel portals and brick and mortar travel agents). The revenue model of the
company was fairly simple; Redbus received a commission on the value of tickets sold. Historically, bus
ticketing had been a cash business and operators were used to being paid in cash, on the spot, by their
agents. Once the customer purchased a ticket and made a payment to Redbus, the company deducted
10 per cent commission and paid the bus operators the remaining money. When tickets were sold through
a third party, they shared 5 per cent of commission with its partners.
On an average, Redbus sold 5,000 tickets daily and out of this, the company website sold close to
3,000 tickets. The Redbus software had a provision for real-time tracking of online bookings through its
portal. A user entered a queue maintained by the system as soon as he/she initiated the process of booking
tickets online. In case the transaction was not completed within twenty minutes of the customer entering
the queue, a call centre executive would call the user to find out if there were any issues and provided
support required to close the transaction.
Redbus had seven physical call centres, with twenty to twenty-five staff members in each call centre
and three satellite call centres. The main reason behind starting these call centres was to provide superior
customer service to customers and to provide them with information about their travel needs. The call
centres operated from 7:00 a.m. in the morning to 11:00 p.m. at night and received about 10,000 calls a
day. Though most of the calls were routine enquiries, many of them were about the purchase of tickets—
on an average, about 1,500 tickets were sold through the call centres.
Redbus recently deployed a call-log software, which enabled the generation of reports to monitor the
performance of the call centre as well as the individual employees working there. These reports, along
with recorded calls, were used for training purposes to ensure a higher level of service quality.

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182 Rakesh Gupta and Ajay Pandit

Today Redbus has about 5,000–6,000 of their own travel agents and by using networks such as
Suvidha, Sugal and Damini, Itzcash, etc., they are able to reach out to more travel agents. Through all
these partnerships, Redbus has 75,000 point of sales outlets.
Ticket cancellations and fare refunds were delivered through the company’s various sales channels.
Most cancellations were reimbursed with coupons for Redbus bookings for a later date as they discouraged
cash refunds (though it could have been provided under exceptional circumstances).
Redbus provided the option of tickets delivered at home, for an extra charge of US$0.5, and gave
customers the option of paying via cash, cheque, credit card and debit card. Customers could book, select
a seat, book roundtrip tickets, as comprehensive information on bus schedules, destinations and price
options across operators was provided by Redbus. The contribution of online mode, call centres, partner
channels and mobile phones was 60 per cent, 30 per cent, 9 per cent and 1 per cent, respectively, in vol-
ume terms (Table 4).

Table 4. Data for Each Channel of Sales of Redbus

Website Call Centres Channel Partners Mobile Phones

Tickets sold/day 3,000 1,500 450 50
Percentage of sales 60% 30% 9% 1%
Commission 10% 10% 5% 9%
Costs associated Minimal Operator salaries, telephone 5% commission paid 1% commission paid
bills, rental of facilities to channel partners to telecom partners
Home delivery Yes Yes No Yes
Regional Language No Yes Dependent on No
support channel partners
Source: Company documents.

Building a Company with Distinct Culture

Even though the company had grown rapidly and was able to raise a lot of capital, the founders kept con-
stant focus on low costs. They decided very early that the company would have a distinct culture, which
would be built on the principle of low cost operations, professional integrity and better customer service.
Phani described Redbus as a conservative Indian company that kept a strong focus on low cost operations
and tried to reduce costs wherever possible. The founders decided that their offices would be low frill, to
the extent that even today, they do not have air conditioners. The founders still travel by bus to meet
operators even on long routes like Bangalore–Mumbai, which takes twenty-two hours.
The three partners started taking a minimal or ‘survival’ salary starting February 2007, and even
though the company had grown manifold, they still receive the same monthly salary. The founders
recruited people for their call centres who know the vernacular language of the region in which it is
located rather than English-speaking executives. This resulted in recruiting employees at lower
salaries.
One conscious decision that helped the founders gain respect and trust from the operators was the
decision not to raise commission even when they were filling 90 per cent of bus seats which made the
bus operators work with them as partners.

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The Journey of Redbus 183

Though the company had not come out with a formal code of ethics, but the founders believed that to
be a successful organization, it needed to portray transparency, integrity and honesty to elicit trust. This
focus on transparency and honesty helped them in building a strong relationship with various stakeholders
including Venture Capital firms, bus operators, employees and others.

People
As they were building the company, the founders persuaded Abey Zacharia to join as Head of Business
Development while Mayank Bidawata joined the Marketing department. Both were MBA graduates—
Abey from the University of Madras and Mayank from the Asian Institute of Management, Manila.
Mayank had worked in direct marketing at Lintas, and before that, handled retail banking products at
ICICI. He gave up his job in Mumbai, relocated to Bangalore and took a salary cut to become part of the
Redbus venture. The Head of Alliances, Aditya Swaroop, an MBA from IIM Kozikode, worked in
Corporate Strategy at Airtel in Delhi, also took a salary cut and moved from Delhi to Bangalore to join
Redbus. They all came together because of the latent opportunity in the online bus ticket segment and
belief in Redbus (Table 5). Today, Redbus has an employee base of 250, and this year it is expected to
increase by an additional 100.
Redbus’ growth has led the company to start introducing various systems to help manage the organ-
ization better, such as the recently introduced appraisal management system. They have been continuously
working on increasing the scalability of their team and increasing their capability to handle new load,
traffic and traction. As the company was expanding and in the process of scaling up, Redbus hired a few
experienced professionals to get the required skill sets; therefore, they employed a Chief Financial
Officer (CFO) and heads of Technology, Marketing, and Operations.

Table 5. The Team

z Phanindra Sama, Co-founder, B.E. (Hons) Electrical Engineer from BITS, Pilani. Previously worked with
Texas Instruments, Bangalore, for four years.
z Sudhakar Pasupunuri, Co-founder, B.E. (Hons) Engineer from BITS, Pilani. Previously worked with IBM,
Bangalore, for four years.
z Charam Padmaraju, Co-founder, MSc (Hons) Physics and B.E. (Hons) Engineer from BITS, Pilani. Previously
worked with Honeywell, Bangalore, for four years.
z Abey Zacharia, Head, Business Development. Previously worked with Standard Chartered and Citibank,
Masters of Business Administration, University of Madras.
z Mayank Bidawakta, Head, Marketing, MBA, Asian Institute of Management, Manila. Previously worked with
ICICI Bank as Product Manager.
z Aditya Swaroop, Head Alliances, MBA-IIM-Kozikode, previously worked with AIRTEL.
Source: Company documents.

The Growth Story

Over a period of time, the company’s value proposition had started appealing to people and Redbus
started generating more buzz. Customers started using their website increasingly as consolidated

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184 Rakesh Gupta and Ajay Pandit

information about departures and fares was not available anywhere else. Nobody knew how many buses
went from X to Y, at what time and what the price of the ticket was. Once the customers started using the
Redbus website, it was relatively easy to build the network. The company established itself in August
2006, with a single bus operator, with an inventory of ten tickets, covering two routes (Tables 6 and 7).

Table 6. Major Milestones

z August 2006: Launch of the Redbus website and the Bangalore office.
z December 2006: Launch of the Hyderabad office.
z February 2007: Launch of the Chennai office.
z April 2007: Launch of the Mumbai office.
z May 2007: First round of funding.
z June 2007: Launch of the Pune operations.
z August 2007: Launch of the Delhi operations.
z December 2007: Launch of the Ahmedabad office.
z July 2008: Second round of funding.
z December 2008: Launch of the Coimbatore office.
z August 2009: Launch of the Vijayawada office.
z September 2010: Launch of the Visakhapatnam office.
Source: Company documents.

Table 7. Company Details

Company: Redbus Country: India (Bangalore)

CEO: Phanindra Sama Industry: Bus Ticketing
Year founded: 2006 Employees: 250
Website & email: www.RedBus.in
Mission: To solve the inefficiencies in the Indian bus industry
by making ticketing more transparent to the
customer.
Source: Company documents.

Today, Redbus has a network of 700 operators on more than 10,000 routes with an inventory of
500,000 tickets covering 2,500 cities and towns in sixteen states.
Redbus has seen positive growth since its inception, selling an average of 5,000 bus tickets per day—
with ticket sales experiencing 20 per cent growth on a month to month basis. The first year was not a full
year and they did business worth US$100,000, but by the second year ending March 2008, the revenue
reached US$1 million. In 2009, the revenue grew six times and touched US$6 million and Redbus turned
profitable from December 2009 onwards.
By March 2010, the turnover crossed US$14 million and had touched US$30 million by the current
year ending March 2011, which they expect to reach US$200 million by 2015 (Table 8).
With 250 employees, ten offices (in Bangalore, Hyderabad, Chennai, Coimbatore, Pune, Delhi,
Visakhapatnam, Ahmedabad, Mumbai and Vijayawada), seven physical and three satellite call centres
and home delivery of tickets in ten cities (Figure 2), Redbus has come a long way. From just the birth of
an idea a few years ago, Redbus today has established a strong brand and is the first and the fastest grow-
ing online bus ticketing company in India (Table 9).

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 Editor’s Introduction

Table 8. Redbus Growth

2006 2007 2008 2009 2010 2011

Number of Employees 26–50 51–100 101–60 161–210 211–30 250
Launch of Offices 2 5 1 1 1 Nil
Number of Operators Less than 50 100 150 300 600 700
Turnover US$0.1 million US$0.5 million US$1 million US$6 million US$14 million US$30 million
Profit Break-even Losing money Losing money Making money Making money Making money
Source of Capital Own capital Venture capital Venture capital Venture capital Venture capital Venture capital &
internal resources
Source: Company documents.

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185
186 Rakesh Gupta and Ajay Pandit

Figure 2. Location of Corporate Head Office and Branch Offices

Source: Company documents.

Table 9. Compiled Summary of Redbus’ First Press Coverage

Exclusive interview with Redbus.in—India’s first vertical for online bus tickets
Written by: Madhur from I-leher
On Oct. 18th, 2006
Online ticketing is big. It’s clearly leading the ecommerce industry in India. IRCTC (online railway ticketing) is the
biggest player followed by air tickets. Not surprising that there are so many travel portals funded by the biggest
VCs in India.
We had a chat with the three co-founders (Phanindra Sama, Charan Padmaraju and Sudhakar Pasupunuri) of India’s
first vertical for online bus tickets called Redbus.in. They launched the site just a couple of months back in August
2006 and have already partnered with few bus operators in India and are doing great in terms of sales. Below we
share their experiences, insights and thoughts on business, industry and consumer trends.
1. What inspired you to start this venture?
This venture has come out as a result of a necessity. Last Diwali one of the co-founders was looking for bus tickets
to travel home and missed the bus because of getting too late in buying the ticket. That’s when the idea struck that
it would be really useful to have a service where people can buy bus tickets online.
2. Overview about how the company evolved from idea to ‘live’ state?
Started off with talking to travel operators to understand how the industry works. Surveyed the bus operators
and travel agents to figure out the logistics. Convinced the bus operators about advantages of online tickets sales.
Provided the software needed to maintain their tickets inventory. While some operators signed up for real time
tickets inventory update to Redbus, most of them agreed for providing tickets to Redbus on a quota basis.
3. How does your team look like?
3 business development and marketing people, 2 software developers and 3 customer support agents. All currently
based in Bangalore.

(Table 9 continued)

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The Journey of Redbus 187

(Table 9 continued)

4. What is your business model?

Commission from booking tickets and ads on the site.
5. How is Redbus doing so far? Any feedback from customers?
There has been a growth rate of 100% every month since inception. Ticket sales for this month as of today
(October 17) are already more than double the sales from the complete month of September. Customers have
given very positive feedback.
6. What are some of the key challenges in your business?
Making sure that assigned seat (during e-booking) remains when passengers board the bus. There is a lot of travel
on weekends, but on other days occupancy is less.
7. What are the marketing strategies that you have been using?
Email distribution lists, pamphlets on bus stations, posters inside the busses, Google ad words (surprisingly number
of clicks resulting from that is not very significant).
8. What is the payment method most used by users?
There is a 50–50 split between credit and debit card. Plan to introduce mobile payment soon.
9. What are the challenges of running a business in India?
Other than the obvious issues of Internet penetration and customers being hesitant of doing credit card transactions
online, evangelizing and educating the customers is a big task. Things do not always get done as fast as you would
like. Coding gets done fast, but there are lot of other variables and things can get delayed to them.
10. How has TIE-EAP program helped you?
TIE was really helpful from day one. It was a source of continuous mentorship and direction. It provides a great
network of relevant and useful people in the industry.
Source: Company documents.

Future Challenges
Today, Phani is certain of that fact that whenever a young engineer would like to spend Diwali with his
loved ones, he would not have to fret about the uncertainty of getting a bus ticket. Over the passage of
time, Phani had won various awards, is ranked number three amongst India’s Most Promising Entre-
preneurs by Business World and was awarded the Star Entrepreneur of the year at the 3i summit.
Redbus is among Forbes’ top five start-ups to be watched in India in 2010. It is only the second Indian
firm to be part of an international network, Endeavor, which is a non-profit organization initiated by
Harvard alumni. Endeavor identifies high-impact entrepreneurs and assists them in scaling up their busi-
nesses. The company has changed the nature of road travel as travellers can now buy tickets online, and
the concept of advance booking, return tickets and seat selection has emerged in this sector. Phani be-
lieves this segment is nowhere near getting saturated and that there would be an explosion in growth
powered by higher Internet penetration, urbanization, better roads and liberal government policies.
The passion of the founders to work in this segment, transform the nature of this segment, and make
an excellent experience for consumers is strong. This has prevented them from considering the option to
sell off Redbus even when they received excellent offers to sell the company. But the founders resisted
the urge because of the passion and belief they have in the offering. As Phani said, ‘We have no personal
goals and targets from Redbus and just want to build a great company.’

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188 Rakesh Gupta and Ajay Pandit

Phani has mulled over the future direction of the firm as players such as Ticketwala.com and others
have begun to sell bus tickets by automating the operators’ inventory system. Ticketvala.com is a soft-
ware provider that would charge a transaction fee for every ticket sold through its platform. The com-
pany considers itself a software vendor and a platform operator first, and second as a consumer ticketing
brand.
Redbus is planning to launch an inventory management system targeted at bus operators—something
that was their initial business model. The founders sensed a higher probability of success this time be-
cause more and more operators have bought computers. Already 300 out of the 700 operators that Redbus
works with currently have fully automated their ticket reservation systems and Phani thinks that in the
next few years, most of the operators will computerize their ticket reservation systems.
Regarding this option of launching the inventory management system, the issue concerning Phani
was that the majority of the market was occupied by small operators with a fleet size of less than 20
buses. Phani was still not very sure about how these small operators would respond to the proposal. This
may affect the growth of Redbus or at least slow it down in the near future, as this was the segment they
are set to tap into to increase their inventory as they have already covered most of the large- and mid-
sized operators.
The other issue was the entry of major travel portals like Yatra.com and Makemytrip.com, as they
were expanding into this space as well. These were very big players in the travel industry and offered a
basket of services rather than the standalone player like Redbus. They enjoyed excellent brand equity
as well as huge consumer traction in the market and Phani was not very sure whether to compete or co-
opt with them.
Phani was planning to discuss these issues at length with Sanjay in their next interaction before
chalking out his future course of action.

Notes
1. Internet Worldstats by Miniwatts Marketing Group.
2. An Indian game show based on the UK game show, ‘Who Wants to be a Millionaire?’

References
Indian Brand Equity Foundation. 2011. ‘Industry Report on Tourism and Hospitality’. Available at http://www.ibef.
org/industry/tourismhospitality.aspx, accessed on 1 August 2011.
Sachitanand, Rahul. 2010. ‘Rush for Coach Class’, Business Today, 21 March. Available at http://businesstoday.
intoday.in/story/rush-for-coach-class/1/5353.html, accessed on 1 August 2011.

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