Cab Booking Firm Ola Turns To Tencent, To Dilute SoftBank Hold

SUMMARY

Since November 2016, Ola Has Raised About $404 Mn In Funding

Softbank-backed cab booking platform Ola is currently in talks with Chinese internet conglomerate Tencent for a prospective $400 Mn funding round.

“Tencent executives were in Bangalore last week and they met the Ola management team to discuss the transaction,” as per one person in the know.

However, both the companies have not reached a conclusive agreement on the funding.

Since November 2016, Ola has raised close to $404 Mn, as per disclosures made with the RoC. The funding round of $350 Mn raised in February 2017 took its valuation to about $3.5 Bn. Later in June, the cab booking platform reportedly picked up about $50 Mn funding from hedge fund Tekne Capital Management, as an extension of its ongoing round.

If Ola manages to sweep the $400 Mn investment from Tencent it will take the company’s fundraising to $800 Mn, this year alone. The additional capital will escalate the cab booking platform’s valuation to about $4 Bn, as per a recent report by ET.

The investment by Tencent will provide the cab aggregator with the financial backing to compete against Uber. It will also help in diluting investor SoftBank’s hold on the company. SoftBank currently holds over 40% stake in the company.

Inc42 earlier reported that SoftBank was in talks with major stakeholder Tiger Global to buy the latter’s shares in the company for about $700 Mn. This news came soon after Ola made changes in its shareholding terms, restricting the purchase of its shares by investors without founders’ consent.

Founded by Bhavish Aggarwal and Ankit Bhati in January 2011, to date, the company has raised equity funding of $1.9 Bn in 10 rounds from about 20 investors. Ola’s parent company ANI Technologies’ losses increased 2X in FY ’16. Ola had incurred a consolidated loss before tax of $360 Mn (INR 2,313.66 Cr) in FY16, as compared to $123.9 Mn (INR 796 Cr) in FY ’15.

Earlier this week, it was reported that Ola was in talks with Microsoft too. The US-based technology giant was looking to invest $50 Mn-$100 Mn (INR 320 Cr-INR 640 Cr) in the home-bred cab aggregator. In exchange, the technology giant will acquire a minority stake in the ride-hailing startup. Ola currently uses Amazon Web Services (AWS) for its operations. If the suggested deal goes through, it will likely switch to Microsoft’s Azure Cloud Computing Platform.

Earlier this month, Ola invested about $15.5 Mn (INR 100 Cr) in its wholly-owned leasing subsidiary Ola Fleet Technologies, as per documents filed with the RoC. This move is in a bid to establish the stronghold of the company as it gears up against Uber. Earlier in March 2017, the company had invested about $7.5 Mn (INR 50 Cr) in Ola Fleet Technologies.

Ola is also tapping into the electric vehicles space, as well. In May 2017, Maharashtra Chief Minister Devendra Fadnavis inaugurated India’s first multi-modal electric vehicle project and an Ola electric charging station in Nagpur.

The cab booking platform has also bet on outstation travel and the auto aggregator space to strengthen its revenue share against the Uber app. With so many segments hanging on the balance, how much can SoftBank-backed Ola compete against the Uber app and will it succeed in raising $400 Mn from Tencent remains to be seen.

(The development was reported by ET)