Ola has curbed SoftBank’s ability to raise its stake. Ola’s chief executive would prefer to raise cash from new investors. If that fails, Ola may have to rely on SoftBank for capital.
Ola has curbed SoftBank’s ability to raise its stake. Ola’s chief executive would prefer to raise cash from new investors. If that fails, Ola may have to rely on SoftBank for capital.

How $1 billion fresh capital can fuel Ola’s expansion

Last year, cab-hailing service Ola secured $1 billion in fresh capital from marquee investors including Tencent and SoftBank. The start-up is in talks to raise another $1 billion to fund its expansion strategy across various businesses. Mint gives you the low-down.

Why does Ola want to raise $1 billion?

Ola, run by ANI Technologies Pvt. Ltd, is eyeing $1 billion from South Africa’s Naspers, Singapore’s Temasek Holdings and two other funds. The highly competitive cab-aggregation market requires the Indian start-up to maintain a large war chest to fight deep-pocketed Uber. Ola also needs capital for its other initiatives. It is expanding to overseas markets, including the UK, Australia and New Zealand. Alongside, it is shoring up its food delivery business, Foodpanda, that competes with the likes of Swiggy and Zomato. The firm is also expanding its electric vehicles unit and its payments business, Ola Money.

Why is Naspers interested in putting capital into Ola?

South African internet and media behemoth Naspers has been investing in Indian internet companies for several years. Over the past two years, Naspers has stepped up its investments. The company has significant investments in travel, both in India and other markets. In India, Naspers has a large stake in MakeMyTrip Ltd, which had bought Ibibo, a company owned by Naspers. In 2013, Naspers also bought online bus ticketing platform RedBus. If the deal with Ola goes through, it will add to Naspers’s large portfolio of travel investments.

Will SoftBank invest in the Ola round?

Ola has curbed SoftBank’s ability to raise its stake. Ola’s chief executive would prefer to raise cash from new investors. If that fails, Ola may have to rely on SoftBank for capital.

What is the valuation Ola wants?

In its $50 million fundraise from Sailing Capital and China-Eurasian Economic Cooperation Fund this month, the SoftBank-backed start-up was valued at roughly $4.3 billion. It is hoping to double that valuation and fetch $7-8 billion in the latest round. Ola has also adopted a group structure similar to that of Flipkart in order to increase its valuation. It has already separated its various businesses, including Foodpanda, the electric vehicle unit and Ola Money, which are now run as independent entities.

Why is the funding round at Ola taking so long?

Last year, the cab-hailing start-up had amended its shareholders’ terms to strengthen the rights of its founders and weaken those of its largest investor, SoftBank Group Corp of Japan. Then, late last year Ola chief executive officer Bhavish Aggarwal blocked a proposed sale of shares by Tiger Global to SoftBank. Potential investors are wary of being pitted against SoftBank, the world’s most powerful investor in technology companies.

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