Ola Cabs has come a long way since it inaugurated in 2010. Two IIT Bombay alumni have brought up a company which strengthened in such a way that even a giant like Uber couldn’t topple it. The Indian company has received a lot of funding in recent years. However, since 2015, it has received some huge investments from foreign firms. Baillie Gifford, a Scottish investment company is one those which provided $500 million in funding to Ola Cabs.
In 2016, amidst serious rounds of funding, SoftBank came into the picture. SoftBank was leading the rounds then and ended up investing $1.1 billion in October of 2017. This enabled them to the 26% of the Ola Cabs share. That investment made them the highest share owner of any of the investors which has now become a problem for Ola Cabs CEO Bhavish Aggarwal.
SoftBank has come in with an offer of another $1 billion investment in the new financial rounds for Ola Cabs. This investment comes at a nice time for Ola. However, Aggarwal has decided to give it a second thought before accepting the generous offer from the Japanese investment company. The IIT alumnus cannot risk giving another 10-15% share to SoftBank given that they already own the 26% share.
It is understood from sources that SoftBank’s CEO Masayoshi Son and Ola CEO Bhavish Aggarwal have met multiple times to discuss the deal. It is also understood that Aggarwal is inclined towards declining the offer from the Japanese. This is not SoftBank’s first approach to own further shares in Ola Cabs. Aggarwal might consider the Japanese offer but in different circumstances. There is a possibility that he might look at a lesser amount from the Japanese company.
Tiger Global, Ola Cabs one of the earliest investors, had held talks with SoftBank over the selling of their shares. However, the talks had taken place without the knowledge of Aggarwal and it all fell apart. Since then the CEO of Ola is looking for allies and friends on the voting table. He has found one in the name of Temasek. After securing another $200-250 million investment from Flipkart co-founder Sachin Bansal and their already existing investor in Steadview Capital, Temasek is also supposed to chip in. This will happen with a view of gaining the votes. Temasek and Bansal will hold 7-8% of the shares.
Apart from those, Yuri Milner owned DST Global has bought 6% share in 2015 and have given their voting rights to Ola co-founder. The two founders of Ola hold almost 11% share and given all the promised voting rights they hold about 25% of the voting rights which might be enough to hold on to the company.
That said, the new financial rounds are taking place in order to exploit different business routes. The reason for that is Ola and Uber have become somewhat stagnant in the taxi business. They registered 20% growth on average with 3.5 million rides. However, the rides have been increasing but the growth has decreased substantially. The duo, in 2016, recorded 90% growth with 1.9 million rides in a single day. That slipped down to 57% in 2017 with rides increasing to 2.8 million and the 2018 scenario as we know is even worse.
Giving all the stagnancy, Ola is looking to expand its food business with Foodpanda and that is not the only route for the cab company. It is also looking to expand in the sector of e-pharmacy which promises profits even after giving large discounts. Foodpanda, however, has expanded a lot in the last few years. It has managed to cement its place in 60 cities which is more than Zomato and Swiggy. Ola is looking to duplicate the success of its food delivery application with Pharma delivery as well. It is soon going to venture in that direction.
– Unmesh Phule