(Bloomberg) — Brazilian startup Turbi, which offers hourly car rentals, has secured a local note issue worth R$156 million (US$29 million), anchored by Itaú Unibanco Holding SA, to finance its domestic expansion and prepare for a possible initial public offering (IPO).
The São Paulo-based company has expanded rapidly in Brazil’s largest city over the past two years, with car rental revenue growing 35% in the second quarter from a year earlier. Its vehicle fleet increased by 64% to 5,800 vehicles in the same period — and with the new financing that number is expected to grow to around 7,000.
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Itaú, Brazil’s largest bank, contributed most of the funds for the issuance of local notes. Japan’s Credit Saison Co. also participated.
Turbi positions itself as a flexible alternative to the traditional daily car rental model, used by companies such as market leader Localiza Rent a Car SA (). It also competes with Movida Participações SA () and Unidas SA. Turbi seeks to strengthen its core operations in São Paulo and nearby cities, while expanding to other Brazilian capitals.
The high cost of credit in Brazil — the benchmark Selic rate is currently at 15% — has forced startups to temper their growth ambitions and carefully structure how they raise capital.
In an interview, Turbi’s chief financial officer, Mario Liao, said the agreement will help the company access international credit markets in the future. He added that large banks typically offer lower borrowing costs, which will give Turbi a competitive advantage.
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Having Itaú as a supporter can open doors to new partnerships with other financial institutions, according to Turbi’s director of investor relations, Eduardo Portelada.
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“We are frequent issuers of credit, and these transactions could pave the way for an IPO in the future,” he said. “We are warming up our engines so that maybe one day we can accomplish this.”
Portelada did not give a specific forecast for when the IPO would take place. He said the company “is already discussing new rounds of financing with other institutions.”
Turbi’s net debt/EBITDA ratio, which is a measure of earnings that excludes items such as interest and taxes, is between five and six times — a level that Liao considers high. To resolve this, Turbi is in negotiations to sell an equity stake.
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“This is our agenda for the next quarter,” said CEO Daniel Prado. “Our goal is to reduce leverage to around five times.”
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