Ola might raise a capital of $ 500-750 million only, gets lower valuation

India Infoline News Service | Mumbai | November 25, 2016 14:44 IST

Ola is gearing up to raise fresh funds from investors at a lower valuation. The homegrown ‘unicorn’ is looking to raise a capital of $ 500-750 million in the latest round.

India’s largest cab hailing service app, Ola is gearing up to raise fresh funds from investors at a lower valuation. The homegrown ‘unicorn’ is looking to raise a capital of $ 500-750 million in the latest round.

In the last evaluation, Ola was valued at $ 5 billion and had raised $ 500 million last November. In the latest round of evaluation led by Japan’s Softbank, it is now being valued at $ 3-4 billion. In addition to existing, Ola is said to be in talks with Russian billionaire Yuri Milner's DST Global, Tiger Global Management and hedge funds for fundraising.

Looking at the present scenario, it is a necessity for the company to keep raising huge amounts of cash to fund its operations, considering the cutthroat competition it has from Uber.

Funds till date
Till now, Ola has raised more than $1 billion in investments. In its last fundraising, it secured $ 500 million in a Series F round from Scottish investment firm, Baillie Gifford and China’s Didi Chuxing. Falcon Edge Capital, Tiger Global, SoftBank, and DST Global also participated in the round.

In April 2015, Ola raised $ 400 million in funding led by DST Global in a Series E round. In October 2014, it raised a capital of $210 million from investors led by SoftBank as part of its Series D round. In July 2014, Ola raised $41.5 million from Steadview Capital, Matrix Partners, Tiger Global Management and Sequoia Capital.

Softbank Valuation
Japanese investor SoftBank has marked down the value of two of its largest Indian start-up investments Ola and Snapdeal. SoftBank has written off around $ 550 million in the value of shares in its investments in India, which includes ANI Technologies, India’s largest cab aggregator Ola, and Jasper Infotech, which runs e-commerce marketplace Snapdeal.  The Japanese currency’s appreciation against other currencies is a major factor leading to the value of the mark-downs.

“Gain or loss arising from financial instruments at FVTPL (fair value through profit or loss) comprises mainly changes in fair value of preferred stock investment including embedded derivatives, such as ANI Technologies Pvt. Ltd and Jasper Infotech Private Limited in India, designated as financial assets at FVTPL,” said the company in its filings.

SoftBank led a $ 210 million investment in Ola and $ 627 million in Snapdeal in October 2014. It has also made follow-on investments in both firms.

Ola Story
Starting this fiscal, Ola has been ironing out things in its core business. Ola dropped offerings including Ola Cafe and Store, its food and grocery delivery services. In order to compete with Uber, it introduced Micro in March 2016. There were other varied innovations for different of user segments introduced in the app.

As per media reports, Ola was doing 750,000 rides a day across 100 cities and Uber claims to have 150,000 drivers on its network and doing more than a million rides daily in September itself.

In the last three years, Ola leads the Indian market in terms of market share. Its closest competitor Uber is slowly catching up and is threatening to eat into Ola’s revenues.

Ola Needs Huge Corpus
After the confrontation in China with Uber where the later lost to Didi Chuxing, Uber has indicated its plans for India. Uber with its deep pockets is preparing to take on the Ola in India and it seems it is going be a no mercy war here.

Uber in last increased its market share by spending heavily on getting more cabs on board, paying huge subsidies to drivers, and offering low prices to customers, which it can easily manage without feeling a pinch. The fact that Ola cannot forget is that Uber is the world’s most well financed startup having raised $ 15 billion in equity and debt. 

Adding to its woes, Uber raised $ 3.5 billion from Saudi Arabia's sovereign wealth fund, and gained a crucial partner in its expansion into the Middle East. The investor Saudi Arabian Public Investment Fund valued Uber at $ 62.5 billion. With this, it is now the most highly valued venture capital-backed company in the world.  

And, Uber has pledged to invest a substantial portion of the $ 3.5-billion in Indian market.

Hopefully, Ola will manage to raise the expected capital. However, the competition is all set to intensify in the future. The rivals are at extremes in terms of size, cash availability and more, only few factors will decide the leader including service quality and innovation in offerings. 

 

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