Degree

Master of Business Administration

Faculty / School

Faculty of Business Administration (FBA)

Advisor

Dr. Sana Tauseef

Committee Member 1

Dr. Sana Tauseef, Assistant Professor, Faculty of Business Administration, Institute of Business Administration (IBA), Karachi

Project Type

MBA Research Project

Abstract / Summary

Ride hailing services have gained popularity across the globe, but are a relatively recent phenomenon in Pakistan, with the first ride hailing application launching in 2015 in the country. At present the Pakistani ride hailing market is dominated by Careem and Uber, and while smaller local players entered the market, they were not able to compete with their larger counterparts and most wound up operations in their initial years. Nonetheless, owing to the dearth of proper mass transit systems in Pakistan’s metropolitan cities, and a lack of government interest in the subject, the ride hailing market offers a huge growth opportunity.

The report presents the financial and commercial feasibility of a ride hailing venture in Pakistan, with particular focus on Karachi and Lahore, the two main urban centers in the country. For the purpose, a financial model has been developed to assess the financial and commercial feasibility, and scenario analysis has been conducted using optimistic, realistic and pessimistic base cases. In addition, primary research has also been conducted to estimate key input variables, which form the basis of the financial model. Two separate surveys were conducted, to get the perspective of both the drivers and consumers of ride hailing applications in Pakistan, which formed the basis of these key input variables.

As per the financial feasibility, in realistic scenario the project is estimated to have an NPV of Rs. 4.2 billion, with an IRR of 68%, discounted payback period of 7 years and the project is expected to achieve operational breakeven in 3 years. Meanwhile, the project is expected to have an NPV and IRR of Rs. 2.6 billion and 52% in pessimistic scenario and Rs. 5.2 billion and 76% in optimistic scenario respectively.

However, the model is based on the assumption that the client will achieve the proposed customer uptake and captain acquisition targets, for which they will need to have a strong go to market plan in place. Further, it is pertinent to mention that in order to survive and compete against international rivals of much bigger scale, the client will have to invest heavily in the initial three years, including offering higher incentives to captains and heavy discounting for consumers. Further, the success of the service will mainly depend on the strength of the ride hailing application, its user interface and ease of use. Hence, based on the positive financial indicators, we recommend the client to go ahead with the project.

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