SUMMARY
The Temasek backing, which will bestow more powers to the Ola cofounders, is subject to the approval of the CCI
The Temasek transaction is being carried out through a special purpose vehicle in Singapore — Lazarus Holdings
Recently, reports surfaced that Temasek has purchased a large single-digit stake in Ola for around $225 Mn
Bhavish Aggarwal and Ankit Bhati, the founders of ride-hailing company Ola, are well aware of the power of stake in a company. They have been actively engaging and updating the company’s Memorandum of Understanding (MoU) or Articles of Association (AoA) to ensure that their stake in the company, and their voice in the board, remains strong.
Even as they expand Ola’s presence internationally, the founders continue to ensure their position of strength in the board. They have now got the backing of Singapore-based Temasek Holdings, which has agreed to vote with them as part of a recently structured secondary subscription of shares.
The Temasek backing will bestow more powers with the Ola cofounders. Aggarwal and Bhati strengthened their rights last year by amending Ola’s AoA to enable them to veto any further stake purchases by the company’s largest shareholder — Japanese holding conglomerate SoftBank — and also to protect their stake.
According to reports citing sources aware of the development, the Temasek deal is subject to the approval of the Competition Commission of India (CCI) and others. Temasek and ANI Technologies, Ola’s parent company, have applied to the CCI for approval of the deal.
Further, the Temasek transaction is being executed through a special purpose vehicle in Singapore Lazarus Holdings. The vehicle has been created by Temasek’s indirect subsidiary, MacRitchie Investments, along with Bhati and Aggarwal.
“The proposed combination pertains to the indirect acquisition of less than 10% of the share capital of ANI by Mr Ankit Bhati, Mr Bhavish Aggarwal and MacRitchie through Lazarus from certain existing shareholders of ANI,” said a CCI filing shared by data platform Paper.vc.
It was further highlighted that the selling shareholders include some employees of Ola besides angel investor Rehan Yar Khan and venture capital (VC) investors who received shares in Ola after its acquisition of TaxiForSure in 2015. These investors include VC firms Accel India, Bessemer Venture Partners, Helion Venture Partners, and TaxiForSure founders Aprameya Radhakrishna and Raghunandan G, who are making a partial exit from Ola.
Recently, reports surfaced that Temasek has purchased a large single-digit stake in the company for around $225 Mn. The stake was bought from a group of early investors in the company. Temasek is also in discussions with Ola’s management to pump in more money into the company by way of subscription to new shares.
A Temasek spokesperson reportedly said the fund “will be unable to provide further guidance as it (deal approval) is also subject to regulatory approvals.”
Ola Founders Protecting Their Stake And Board Seat
It must be noted that SoftBank, with a 26% stake in Ola, has also emerged as the largest shareholder in Ola’s main rival Uber. US-headquartered hedge fund Tiger Global Management, another influential shareholder, has around 16% in Ola.
Last year, Aggarwal reportedly blocked a proposed deal in which another stakeholder — Tiger Global — was gearing up to sell a portion of its stake in Ola to SoftBank for somewhere around $400 Mn-$500 Mn.
In November 2017, Lee Fixel, Partner at Tiger Global Management, resigned from Ola’s board.
A few months prior to that, Ola amended its AoA to include a clause to prevent SoftBank from buying more shares in the company without the approval of the founders and the board.
Aggarwal and Bhati have also got rights in the company to ensure that their holding does not fall below 10.9%. Any changes in the AoA or MoU of the company also need the approval of the founders.
The rights have been strengthened as the Ola founders want to protect themselves against a potential merger or sale that SoftBank may engineer with Uber. On the Temasek backing, a SoftBank spokesperson said, “We do not comment on market speculation.”
Other major shareholders in Ola include venture capital firm Matrix Partners India with an 8.6% stake and Chinese Internet conglomerate Tencent with 10.4%.
Reports revealed that DST Global, along with its affiliate Apoletto, holds an over 8% stake in Ola and has already given its shareholding right in the company and board seat to the founders, like it typically does across the world.
The Ola founders have also been strengthening their control on the board of the company and recently appointed their long-time advisor, TVG Krishnamurthy, as a director. The current seven-member board includes Bhati and Aggarwal, besides Matrix Partners’ Avnish Bajaj, Tencent’s Brent Irvin, SoftBank’s David Thevenon, and former Vodafone Global CEO Arun Sarin, who is an independent director.
The Ola founders started pushing for stronger rights since late 2016 after the company raised capital in a down round and investors in companies such as Flipkart and Snapdeal started effecting changes in their management and forcing them to consider consolidation deals.
Here’s a quick update on the happenings at Ola:
- Ola announced that it has launched operations in the UK, where it is offering passengers the option of private hire vehicles (PHVs) and Black Cabs
- In a recent letter to Ola employees, CEO Bhavish Aggarwal said that the company is now making money on each ride
- Till March 2018, Ola had raised a total of $3.9 Bn in 11 funding rounds from about 20 investors
- It is currently present in 110 cities with more than 1 Mn driver partners and has 14 service categories and ferries 2 Mn people every day
- Ola is setting up a group holding company that will own Ola Cabs, Foodpanda, and its other businesses that are still in the nascent stage, such as its electric cabs unit and international operations
- Reports have surfaced that Ola is looking to set up operations in New Zealand and other countries in Asia and North Africa
- In FY17, Ola’s operating loss increased 32% to $543.5 Mn (INR 3,731 Cr) while its operating revenue more than doubled to $171.6 Mn (INR 1,178 Cr)
The Ola cofounders seem to have taken lessons from SoftBank’s failed Snapdeal-Flipkart merger. Reports of Uber India being acquired by Ola and vice versa have kept Bhati and Aggarwal on their toes. The Temasek backing comes as a major support to the cofounders.
[The development was reported by ET.]
