Bengaluru: Cab hailing service Ola has registered an eight-fold jump in revenue in 2014-15 from a year ago, documents showed, riding on discounts and driver incentives powered by two large funding rounds that helped it widen its lead over rival Uber Technologies Inc.
Revenue at ANI Technologies Pvt. Ltd, which owns the brand Ola, jumped from Rs.51.05 crore in 2013-14 to Rs.418.25 crore in 2014-15, according to the documents available with the Registrar of Companies. While revenue increased eight times, losses jumped by more than 20 times—from Rs.34.21 crore to Rs.754.87 crore—during the period, indicating heavy expenditure to gain market share.
Ola earns revenue from the commission that it charges from drivers.
Between April 2014 and March 2015, Ola saw two large rounds of fund-raising, gaining financial muscle to pull ahead of cash-starved TaxiForSure and Uber—the world’s most valuable start-up.
In July 2014, Ola raised $41.5 million from Steadview Capital, Matrix Partners, Tiger Global Management and Sequoia Capital. This was topped up by a $210 million investment from Japan’s SoftBank Corp in October 2014.
TaxiForSure, in comparison, raised $36 million in its entire life cycle before being acquired by Ola in March 2015 for $200 million.
TaxiForSure posted a loss of Rs.228.32 crore against revenues of Rs.25.35 crore in FY15, according to documents available with the Registrar of Companies.
In April last year, Ola went on to raise another $400 million from DST Global, Tiger Global Management, SoftBank, GIC and Accel Partners among others, in a round that valued the firm at $2.5 billion, at a time when the Indian consumer Internet start-ups were riding high on heightened investor interest and frothy valuations. Like others, Ola’s valuation at 30 times its revenue (roughly $70 million as of March 2015) too seemed disproportionate.
Ola did not immediately reply to an email seeking comment.
Ola raised an additional $500 million in November 2015 from a clutch of investors including Didi Chuxing, Uber’s rival in China.
After acquiring TaxiForSure, Ola is now left to fend off competition from Uber, which last year committed an investment of $1 billion in India.
Over the course of 2015, Uber has significantly increased its market share by spending heavily on getting more cabs on board, paying huge subsidies to drivers, offering low prices to customers and accepting cash payments from them.
Uber’s market share soared to roughly 40% at the beginning of this year from just 5% a year ago, according to Uber executives.
However, Micro, Ola’s cheapest offering, has helped turn the company’s fortunes, at least for now. The service, launched early March, has helped Ola reverse much of last year’s market share loss to Uber and opened up a big gap over the rival, but at the expense of a massive cash burn, Mint reported on 16 June.
In response to Micro, Uber has slashed fares for UberGo to match Micro in Delhi, one of its top three markets in India along with Mumbai and Bengaluru.
The price competition underscores the importance of India for Uber, as the country is possibly the last frontier in Asia with a market potential for cab-hailing services. In China, Uber is still a distant second to Didi Chuxing.
Apart from slashing fares, Ola is also experimenting with different models in a bid to evolve into a one-stop service provider for road transport solutions.
For instance, Ola is piloting a car rental service on an hourly basis, in a departure from its business of point-to-point travel, Mint reported on 21 June.
Ola started piloting an outstation service in Delhi, a move that will help the company boost revenue as well as use diesel cars on its platform that are banned from plying in the city by the Supreme Court, Mint reported on 10 May.
The service has since been expanded to most of its major markets, including Mumbai and Bengaluru.