Cab aggregator Ola decided to indulge in some big Christmas shopping this year by going out and buying the food delivery startup, Foodpanda India, yesterday. Ola is planning to pump in another $200 Mn into the business as it once again sets foot in the food delivery space. But for Ola, which has already burnt its fingers with Ola Cafe once, does this move make sense? Former CFO of Infosys, T V Mohandas Pai, believes that Ola was better off concentrating on its cab business.
Talking to CNBC TV18, T V Mohandas Pai stated, “The deal is a sign of consolidation in the industry. Foodpanda was not going anywhere and Uber was coming up. UberEats was adding to their revenues and lowering per capita costs and so Ola had to respond. So Ola has responded. But I don’t know if it makes any sense for both of them given Swiggy is very well positioned in the space.”
Elaborating further on the question of whether the move will in any way add to the core business of the company, given that Zomato and Swiggy are powerful players in the field, he added that Ola should have probably bought Swiggy.
“Then they would have acquired a dominant player and a bigger market. But they are spending $200 Mn on an enterprise like Foodpanda which has not gone anywhere and has serious management and credibility challenges. Swiggy, on the other hand, has got everything under its hold-it’s got the expertise, the balance sheet and the investors. But a car service running a food delivery business is a very different game altogether. So I think it is going to be a tough three-way battle and more people are going to lose money,” Mohandas Pai reasoned.
Ola, Swiggy And Food Delivery In India
In the same media interaction, Rajesh said, “Let’s look at the bigger picture. India does between 8 Mn to 10 Mn deliveries per month. China does 16 Mn deliveries every day. So I believe the Indian market clearly has a large headroom. And very clearly, within five years, we will get to 100 Mn deliveries a month. So in such a large market, I think it’s imperative that multiple players play out and consolidation does not happen too early.”