Author(s): Raghu Gopal
Ola, India's largest ride-hailing company, is in talks with SoftBank, Tencent and others to raise up to $2 billion in a new funding round, at a time when global rival Uber is recovering from a management shake-up. The additional investment is expected to help Ola shore up its lead in India and build its supply of vehicles, drivers, as well as technology to help it compete against Uber.
India is a rapidly growing market for taxi aggregators, thanks to the low level of car ownership and poor state of public transportation. Uber and Ola have, at times, engaged in fierce price-wars and dealt with unrest from drivers, who say they were encouraged to take out costly car loans on the promise of high earnings that haven't proven realistic.
Ola continues to lead in terms of market share in India, but Uber has been heaping pressure through driver incentives and promotions aimed at Ola's existing markets. Uber has been pouring money into its operations in the country, having invested over $1 billion in 2015. In May 2017, it spent an additional $8 million to target its rival directly.
Uber tends to be agile in its expansion plans, exiting a market when its strategy doesn't bear fruit. For example, earlier in 2017 it sold its Russian operations to local player Yandex for a stake in the combined entity, and in 2016 it ceded its business in China to Didi Chuxing. To Ola's detriment, this means that Uber has been relying on its Indian unit for fast global growth. Meanwhile, Ola is gearing up to roll out its services in Sri Lanka and Bangladesh, and has plans to broaden its network of over 100 cities in India.
Ola will become the second Indian start-up to raise $2 billion or more in a single funding round. Flipkart was first to do so after securing $2.5 billion from SoftBank recently. The Japanese company has emerged as the largest venture capital investor in India, claiming that the valuation of its investments in the country tops $6 billion. SoftBank is also a major backer of various disruptive taxi companies in different markets including Didi Chuxing and Grab, it became a major shareholder in Ola after it contributed over $200 million to its series D funding round in 2014, and it's currently negotiating a $10 billion investment in Uber itself. Tencent is also a large-scale investor in start-ups and already has significant stakes in taxi services Didi Chuxing, Lyft and Go-Jek in Indonesia.
Like in other markets, mobility and growing ownership of smart devices have enabled companies such as Ola and Uber to alter consumer behaviour and create an app-based, on-demand economy. With about 350 million smartphone users in India and a population of around 1.3 billion, there's still plenty of growth ahead in the ride-hailing space.