Kopitiam Bot

News · Lifestyle · Tech

The race to be India’s second most-valued unicorn is now a game of musical chairs

(Source: qz.com)

India’s largest homegrown mobility firm Ola, which saw its valuation erode significantly in 2017, has now regained lost ground. In fact, it has even surpassed its peak valuation of $5 billion reached in 2015.

The company, on Jan. 10, displaced OYO Rooms to regain its second position in the list of unicorns behind Paytm. This followed the $74 million (Rs520 crore) in fresh funding it raised from its existing investor Steadview Capital at a valuation of close to $6 billion. In 2017, US-based investment firm Vanguard Group had slashed Ola’s valuation to as low as $3.5 billion.

OYO Rooms had gained the status of second most-valued unicorn (A company valued over $1 billion) in September last year.

Uber’s arch-rival in India last raised around $50 million in September 2018 from Hong Kong-based Sailing Capital and the China-Eurasian Economic Cooperation Fund (CEECF) at a valuation of about $4.3 billion.

The company, founded in 2010, has raised around $3.3 billion till now from various investors, including China’s Tencent Holdings and Japan’s SoftBank, according to Crunchbase data.

This latest round of funding is part of the $1 billion that Ola is currently in the process of raising. Last year in January, Ola had raised $1.1 billion from Tencent Holdings and existing investor SoftBank. The company had indicated that it was in talks to raise an additional $1 billion.

Ola did not respond to Quartz’s e-mail query till the time of publication.

Ready for battle

Ola has been gradually building a war-chest in its fierce battle with US-based Uber to gain market supremacy. Present in 110 Indian cities, it is much ahead of Uber’s presence in 17 cities, though the latter has deep pockets and a strong global presence.

Now Ola is also expanding its footprint outside India. Last year, it launched services in Australia, New Zealand, and the UK.

“Ola had to resort to aggressive discounting in Australia in order to compete with Uber, which has been the market for five years. It means the company is burning cash, while its ticket-size will be low,” said Satish Meena, senior forecast analyst at Forrester Research. “This will remain a challenge for Ola. At some point, they will have to take in consideration unit economics and increase prices. It could raise the same situation it is facing in India right now.”

Ola has spent the past seven years since its inception subsidising Indian drivers and riders from its own pockets. However, with global startup funding under pressure, it now needs to start generating profits to sustain its business. But efforts to increase its earnings from cab service has been met with stiff resistance from its driver partners.

In October last year, drivers of both Ola and Uber went on a two-week-long strike in India’s financial capital Mumbai. It highlighted growing dissatisfaction among drivers over dipping incomes, higher commissions, and reduced incentives.

To pad up its revenues from cab services, Ola has diversified into several other verticals. The company is shoring up its food-tech business with Foodpanda, which raised $1 billion from Naspers and Tencent in December. Foodpanda also acquired Mumbai-based cloud kitchen firm Holachef for an undisclosed amount last year to counter Uber’s food-delivery business UberEats. Ola also has invested in electric scooter startup Vogo to boost its bike-taxi service, which is present in 31 cities. UberMoto, launched the same year as Ola bike in 2016, is available in 11 Indian cities.

Besides food delivery and bike-sharing, Ola is also looking to foray into the medicine delivery space through investment in Myra Medicines, according to a report by the Mint newspaper.

Retaining control

However, the multiple funding rounds raised by Ola are not just to rival Uber, but also to keep its investor, SoftBank, at bay.

SoftBank is also an investor in Uber. The company, after modifying some of its regulatory terms to curtail the influence of investors such as the Japanese investment major, has been trying to bring in fresh investors.

Ola, according to industry sources, is resisting a situation like Snapdeal’s, which was to be sold to bigger rival Flipkart. That deal, however, fell through after Snapdeal’s founders retracted. SoftBank was a common investor in the rival companies.

SoftBank, which had invested $250 million in Ola in 2016, had also offered to invest $1 billion more. This additional funding would have given SoftBank a controlling stake in Ola.

More Info: qz.com

Current Affairs
%d bloggers like this: