SUMMARY
The ARK Ola Pre IPO Fund is a special purpose vehicle, set up to support Ola’s IPO plans
The fresh infusion came in on September 27
Ola has been under immense pressure to be profitable before it goes public
Clarification:
On September 23, 2019, various media reports had claimed that Ola had already received INR 35.88 Cr ($5.05 Mn) in Series J funding round. However, the filings on that date only indicate that the company has sought shareholders permission for the funding, as reported by Inc42. It was only on September 27, 2019 that Ola confirmed receipt of the funding, for which it filed the documents with the Ministry of Corporate Affairs on October 10, 2019.
Bengaluru-based cab-hailing unicorn Ola is getting ahead with its preparation for public listing. The company has now received the first infusion from the IPO trust it had set up.
According to the Ministry of Corporate Affairs filings accessed by Inc42, the company on September 27 received INR 35.88 Cr ($5.05 Mn) in Series J funding round from ARK Ola Pre IPO Fund. The filings showed that the company has allotted 16885 shares at a nominal value of INR 10 with a premium of INR 21,240 per share.
As Inc42 reported earlier, the ARK Ola Pre IPO Fund is a special purpose fund, 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.
In its filings, Ola has said that it will use the funds for general business activities.
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.
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.
Ola’s Elaborate IPO Plans
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 six to eight months and they want to be ready for an IPO as early as possible.
Earlier, reports have 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 its 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.
Ola’s Need Of The Hour: Profitability
After the last two months of criticism and retail investors’ wariness for WeWork, SoftBank has made it a point to ensure it never makes the same mistake again.
Masayoshi Son in a gathering with his portfolio companies said that they need to become profitable soon and stressed the importance of good governance. He said that they should get in shape years before they consider going public.
The company has been earning money on every ride since June last year. Further recently, reports claimed that Ola would have turned profitable in FY19. This is because Indian stock exchanges require companies to be profitable for at least three years before they go public.
The report also said that Ola is not looking to list via SME/startup focused listing programmes such as Emerge ITP etc, but rather a direct listing on BSE or NSE. It is a surprising move, especially when Ola’s peers like Freshwork, MakeMyTrip and Yatra are either exploring listing on NASDAQ or already on it.
The concerns of SoftBank for its portfolio companies find merit with recent loss-based listings and the reaction of public investors to the same. Son is now raising another $108 Bn for Vision Fund II, however, getting investors this time around has become harder because of public mishaps with his portfolio companies.
SoftBank-backed Uber’s share price has also suffered a more than 30% drop from the level at which the company went public. This has raised questions on the Japanese conglomerate’s other ride-hailing portfolio, including Ola, Didi Chuxing and Grab.
