SUMMARY
The Loan Will Go Into Expanding Ola’s Fleet Of Commercial Vehicles
Ola’s wholly-owned cab leasing subsidiary, Ola Fleet Technologies, has reportedly procured a term loan of $156.3 Mn (INR 1,000 Cr) from India’s fifth largest private-sector bank, YES Bank. The loan will go into financing the purchase of a new fleet of commercial vehicles.
As per the company’s MCA filings, the loan was issued as part of a hypothecation deed agreement that was signed on March 21, 2017. The cars purchased using the loan will serve as collateral, apart from the vehicles’ consumables and replacement parts.
According to sources at YES Bank, the loan agreement will be valid for a period 48 to 60 months. From the date of its issue, the facility will be available to Ola Fleet until November 30, 2017, post which YES Bank board will reconvene to decide whether the loan term should be extended.
The loan from YES Bank, as per the documents, is based on lease agreements between Ola Fleet and its partner drivers. This comes less than two months after cab booking company Ola invested about $15.5 Mn (INR 100 Cr) into Ola Fleet Technologies, in a bid to establish the stronghold of the company as it gears up against Uber.
Ola refused to comment on the development.
Branching Beyond Cab Booking With Ola Fleet Technologies
Ola originally started its cab leasing programme in September 2015, as part of an initiative aimed at allowing its drivers to borrow taxis at cheaper interest rates. To avail the facility, partner drivers are required to make an initial deposit as well as monthly installments for a period ranging from three to five years.
In January 2015, it acquired Gurugram-based radio taxi service GCabs. This cab leasing entity was then renamed Ola Fleet Technologies. Later in January 2017, Ola appointed Shalabh Seth as the CEO of Ola Fleet. The move came at a time when the company was experiencing rapid growth.
As the CEO, Shalabh is currently responsible for driving supply growth through cab leasing and other driver-focussed initiatives, to consolidate Ola’s position as the market leader in the Indian ride-sharing space.
As per MCA filings, Ola Fleet previously secured a loan of $39 Mn (INR 250 Cr) from Yes Bank in 2016. Over the last 12 months, the cab leasing platform Ola Fleet procured loans of $46.7 Mn (INR 300 Cr) from Axis bank, $31 Mn (INR 200 Cr) from HDFC Bank, and $15.5 Mn (INR 100 Cr) from ICICI Bank.
Ola: Fundings Galore, Despite Rising Losses
Founded by Bhavish Aggarwal and Ankit Bhati in January 2011, the cab booking company has raised equity funding of $1.9 Bn to date in 10 rounds from about 20 investors.
In June 2016, reports also surfaced that the Bengaluru-headquartered startup was in talks with existing and new investors about raising $300-400 Mn in funding. In November last year, Ola’s parent company ANI Technologies Pvt. Ltd secured $260 Mn (INR 1675 Cr) from its largest stakeholder SoftBank Group.
Since November 2016, the cab booking company has raised close to $404 Mn, as per disclosures made with the RoC. In February 2017, the cab aggregator raised $350 Mn from existing and new investors at a valuation of $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. In July this year, it was reported that Softbank-backed Ola was holding talks with Chinese internet conglomerate Tencent for a prospective $400 Mn funding round.
If cab booking startup Ola manages to sweep the $400 Mn investment from Tencent it will take the company’s fundraising to $800 Mn in 2017 alone. The additional capital will escalate the cab booking platform’s valuation to about $4 Bn.
Around the same time, Ola was reportedly in talks with US-based technology giant Microsoft about raising $50 Mn-$100 Mn (INR 320 Cr-INR 640 Cr) funding. In exchange, the technology giant would 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.
Despite the abundance of funding, the last two years have not been completely devoid of hurdles for Ola. In November 2016, it was reported that the Softbank Group Corp marked down close to $555 Mn in two of its Indian investments, Ola and ecommerce marketplace Snapdeal, as per its six monthly earnings report, ending in September 2016.
Ola’s parent company ANI Technologies’ losses increased 2X in FY16. 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 FY15.
Why Uber Is Treading A Similar Path
Ola’s biggest rival Uber Uber started with its leasing business globally in 2013. In India, it got associated with Xchange Leasing in December 2015. In June 2016, it was reported that Uber invested $6.4 Mn (INR 43 Cr) in Mumbai-based car leasing firm Xchange Leasing India Pvt. Ltd, between January and March.
Later in October 2016, Uber continued its investment in Xchange Leasing and invested about $30 Mn (INR 200 Cr) between June and September. The GST rollout has brought forth fresh concerns for cab aggregators. Under the GST regime, leasing a car has a tax rate of 29% to 43%, depending on the type of car. Earlier the tax rate was only 14.5 %.
Interestingly, in a recent ET interview, Softbank Vision Fund CEO Rajeev Misra indicated that the Japanese conglomerate might be moving towards making peace between rivals Ola and Uber. He said, “We own more than 30% in Ola and we would own much less stake in Uber. We have owned the stake in Ola since 2014 and it does send conflicting signals. But we are hoping that we make peace between them at some point.”
SoftBank is currently pushing to grab a small stake in Uber after several failed attempts due to lack of consensus over pricing issues. As per a recent report by Recode, SoftBank offered to buy the stake at a valuation of $45 Bn, while Benchmark has stated that it will not consider anything less than $100 Bn in any case.
Irrespective of whether a consolidation between cab booking platforms Uber and Ola is imminent or not, the homegrown cab aggregator has certainly doubled down on its efforts to reach more drivers through its cab leasing service, Ola Fleet Technologies. How far the loan from YES Bank helps Ola achieve that is something that remains to be seen.
