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Is Mobility Unicorn Ola Gearing Up For Public Listing?

Is Mobility Unicorn Ola Gearing Up For Public Listing?

Ola issued Series J shares to ARK Ola Pre IPO Fund

The fund is registered in Yeongdeungpo-gu district in Seoul

Ola had recently reached out to SEBI to ease listing rules for startups

Bengaluru-headquartered cab hailing unicorn Ola is now getting closer to its ambitions of listing publicly.

According to the Ministry of Corporate Affairs filings accessed by Inc42, on August 29, the company passed a resolution to allot 16,885 Series J CCPS to ARK Ola Pre IPO Fund at a nominal value of INR 10 with a premium of INR 21,240 to raise INR 36.88 Cr ($5.19 Mn).

The ARK Ola Pre IPO Fund appears to be a special purpose vehicle, set up to support Ola’s IPO plans. The fund is registered in Yeongdeungpo-gu district in Seoul, Korea. However, there are no other details available for the same.

Ola’s IPO Plans

In its filings, Ola has said that it will use the funds for general business activities. An Entrackr report cited multiple sources claiming that the company has started working on a plan for public listing. They further claimed that Ola has set up an initial team of about a dozen employees to work dedicatedly for IPO preparations.

Interestingly, the company along with it peers in IndiaTech had recently demanded that the guidelines for a public listing on Indian stock markets be changed for tech startups, specifically the rules around promoter holdings. The startups want the rule for minimum promoter holding requirement of 20% to be removed as it poses a challenge for startups who want to list themselves for stock exchange.

In July, SEBI allowed differential voting rights for startups. Differential voting rights or DVRs are like ordinary equity shares, except that the DVR shareholders have fewer voting rights as compared to the rights of an ordinary shareholder. DVR has been employed by the likes of Tata Motors and Future Retail to enable the founders to retain control of the company even when they have a minority stake.

However, it is to be noted that Ola has been at the forefront for demanding the easing of rules for startups, be it for angel tax or for public listing. Over the last few years, the company has been steadily working towards a public listing and has repeatedly talked about its ambitions.

In 2016 when Rajiv Bansal joined Ola as chief financial officer, he had said that Ola will have world-class processes in 6-8 months and we want to be ready for an IPO as early as possible.

Ola: Lessons From Uber For Loss-Based Public Listing

Founded by Bhavish Aggarwal and Ankit Bhati in January 2011, Ola is now offering its services across 50 cities in India, UK, Australia and New Zealand. The company claims to complete over a billion rides annually with its over 1.5 Mn drivers. The company had been earning money on every ride since June last year.

Ola has raised over $3.8 Bn from marquee investors such as SoftBank, Ratan Tata, Hyundai Motor Company, Kia Motors, Sachin Bansal and others. However, as the company seeks to close another $2 Bn funding round, it is struggling to avoid SoftBank from increasing its stake in the company.

Early this year, reports surfaced that Foodpanda cut marketing and customer acquisition costs by two-thirds, in line with Ola’s de-prioritisation plan for the business in terms of investment. With this, the shuffled team from Ola to Foodpanda had been shifted back to Ola.

This continued shuffling has impacted the company’s attrition rate. LinkedIn’s Top Companies List for 2019 showed that Ola is in bad shape and the cab aggregator’s performance as an employer is failing miserably. From position 5 in 2017, the company stands today at rank 19.

This, coupled with the company’s losses, is a major challenge for the company’s public listing. At a time when global giants like Uber, Lyft, WeWork have had troublesome lessons with IPOs, Ola has a hard path ahead.