Ola boardroom row pits SoftBank against Bhavish Aggarwal

Bengaluru/New Delhi: Japan’s SoftBank Group Corp. is in the midst of a boardroom battle with Bhavish Aggarwal, co-founder and chief executive of cab-hailing firm Ola, according to two people familiar with the matter.

Late last year, Ola co-founder and chief executive Bhavish Aggarwal blocked a proposed deal involving Tiger Global Management selling part of its stake to SoftBank, the people cited above said, requesting anonymity. A few months earlier, Ola had changed its articles of association (AoA) to include a clause to prevent SoftBank from buying more shares in Ola without approval from the company’s founders and board.

After Aggarwal blocked the proposed deal, Tiger Global partner Lee Fixel resigned from Ola’s board.

However, SoftBank is now in talks to anyway buy Ola shares from Tiger Global, the people said. The country’s two most influential start-up investors are considering ways to get around the terms of Ola’s AoA and could come up with an offshore deal structure, the people said.

Tiger Global owns 16% in Ola while SoftBank is the company’s largest shareholder with a stake of 26-27%, according to Tracxn, a data tracker. Ola was valued at $4 billion last year when it raised $1 billion, mostly from SoftBank Group and Tencent Holdings.

Ola denied that SoftBank and Tiger were exploring such a deal.

“Ola’s shareholders are fully committed to the company and are strong backers of Ola’s Founders in their mission. Ola’s shareholders are reputed global institutions and we can unequivocally assert that none of them will do anything which violates their contractual agreements and contravenes Indian laws. Ola is focused on fulfilling its mission of building a global institution every Indian is proud of; will not be detracted or drawn into useless speculations,” an Ola spokesperson said in an email.

SoftBank declined to comment. Tiger Global didn’t respond to an email seeking comment.

A partner at a top law firm said that it was unlikely that Tiger Global and SoftBank would close a deal as Ola’s AoA explicitly prevented SoftBank from increasing its stake without Aggarwal’s approval.

The Times of India newspaper had reported earlier that Aggarwal blocked the Tiger-SoftBank deal last year.

Ola’s board comprises the following: Aggarwal, co-founder Ankit Bhati, SoftBank’s David Thevenon, Tencent’s Brent Richard Irvin, Matrix Partners’ Avnish Bajaj, former Vodafone executive Arun Sarin and T.V.G. Krishnamurthy, who is close to Aggarwal.

SoftBank has the right to appoint one more director “provided that such person is reasonably acceptable to the founders, and all other shareholders”. However, SoftBank’s right to appoint a second board member will not apply if the Japanese company ends up owning 50% or more of the preference shares in Ola’s ongoing funding round, according to Ola’s AoA.

Aggarwal’s differences with SoftBank and Tiger Global are significant. SoftBank and Tiger Global are the country’s most influential start-up investors.

Rumours of a potential merger between Uber India and Ola have been circulating for months. The two people cited above said that SoftBank has been pushing for a merger between Ola and Uber India but Aggarwal has insisted that any such deal will happen on his terms.

The people said that if the differences between Aggarwal and SoftBank continue, SoftBank will favour Uber’s India business over Ola.

Earlier this year, SoftBank spent several billions of dollars for a 15% stake in US-based Uber, becoming the largest shareholder in the world’s most valuable start-up. Its investment in Uber is far more valuable than the stake it owns in Ola. Tiger is also a shareholder in Uber though its stake is far smaller than SoftBank’s.