Back$400 million funding values Ola at $2.5 billion
Consortium of investors led by DST Global pump $400 million into the company
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New Delhi/Mumbai/Bengaluru: Taxi aggregator Ola has become one of the three most valuable Internet companies in India after a consortium of investors pumped $400 million into the company, valuing it at about $2.5 billion.
Ola, run by ANI Technologies Pvt. Ltd, said on Thursday that the company received fresh funds in a round led by Russian venture capital firm DST Global with participation by Singapore’s sovereign wealth fund GIC, Falcon Edge Capital and existing investors SoftBank Group, Tiger Global Management, Steadview Capital and Accel Partners.
The money will help Ola, which in March acquired rival TaxiForSure in a cash and stock deal worth $200 million, to strengthen its position in the taxi services market and also enter new businesses such as logistics.
“The new funds will be used for two purposes. We are currently in 100 cities, we want to be in 200 cities by next March. And we want to grow both Ola and TaxiForSure aggressively in existing cities. Secondly, we will be investing heavily in to scaling up our engineering team and our product architecture," said Bhavish Aggarwal, 29, co-founder and chief executive officer of Ola.
“We have more than 100,000 drivers on our platform, and by the end of 2017, we want to have more than one million drivers," he added.
The investment will allow Ola to go deeper into smaller cities to build personal transportation ground-up, the company said in a statement. Ola has already seen tremendous growth in Tier II and Tier III cities owing to the very limited transport options that currently exist, it said.
The new round of fund-raising comes close on the heels of the ₹ 760 crore Ola raised from its existing investors in March. Investors in the taxi-hailing company also include Orios Venture Partners, Matrix Partners, Sequoia Capital and Snapdeal’s co-founder and chief executive Kunal Bahl.
Ola has now raised roughly $800 million over the past year.
“Ola has become a platform for global investors to bet against Uber, and India is one of the largest markets outside of US," said Vineet Toshniwal, managing director at Equirus Capital Pvt. Ltd.
DST Global, GIC and Falcon Edge have invested in some of the leading Internet success stories globally. DST and GIC are investors in India’s largest e-commerce firm Flipkart.com, too.
“These investors come in at late rounds as they only look for established market leaders. Eventually it will be only one market leader who will create disproportionate value for them," added Toshniwal.
Ola needs capital to spend on marketing, discounts and expansion into new cities. Ola also needs cash to fund TaxiForSure and for the two new businesses it plans to enter this year: product delivery and mobile-based navigation technology. The plan follows similar moves by rival Uber Technologies Inc. in the US, Mint reported on 16 March.
“The taxi market in the West has been taken by storm with the game-changing Uber. In India, the taxi market has been significant but very fragmented," said Harish H.V., partner, Grant Thornton India Llp.
“Ola is working actively on consolidation and has effectively used the mobile app in India. It is now a question of scaling up and garnering a large share of the market, which now has about three or four competitors. Investors are clearly bullish about the business and hence supporting the company to gain market share and hopefully become the winner who takes it all like Uber (is doing in the US)," Harish added.
Bengaluru-based Ola launched food delivery services in a few cities on 20 March and is planning to enter other logistics businesses this year.
Founded in January 2011 by two Indian Institute of Technology-Bombay alumni, Aggarwal and Ankit Bhatti, Ola is the country’s largest marketplace or platform for car rentals and point-to-point cab services.
“Our vision is that people shouldn’t find the need to own a car. And we have been able to make this possible for millions of customers in the past four years and creating over 100,000 driver entrepreneurs on the platform. With increasing smartphone penetration and immense growth in smaller cities and towns, we will be able to drive the benefits of this on-demand platform deeper into the lives of our customers and partners," Aggarwal said.
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