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Ola Gears Up Against Uber, Infuses $15.5 Mn In Ola Fleet Technologies

Ola Gears Up Against Uber, Infuses $15.5 Mn In Ola Fleet Technologies

This Is the Biggest Capital Infusion Since The Subsidiary's Acquisition In 2015

Cab aggregator Ola has invested about $15.5 Mn (INR 100 Cr) in its wholly-owned leasing subsidiary Ola Fleet Technologies, as per documents filed with the RoC. This move is in a bid to establish the stronghold of the company as it gears up against Uber.

This infusion of funds is the biggest investment in the subsidiary since its acquisition in 2015. Earlier in March 2017, the company had invested about $7.5 Mn (INR 50 Cr) in Ola Fleet Technologies.

Ola Fleet – The Journey

Ola began with the leasing programme initially in September 2015, thereby allowing its drivers to borrow taxis at cheaper interest rates. In January 2015, it acquired Gurugram-based radio taxi service GCabs. This entity was then renamed Ola Fleet Technologies.

In January 2017, Ola appointed Shalabh Seth as the CEO of Ola Fleet Technologies, a wholly-owned leasing subsidiary. This move comes at a time when the company is experiencing rapid growth and is transforming the ride-sharing industry through product and business innovation.

As the CEO, Shalabh is responsible for driving supply growth through leasing and other driver-focussed initiatives, to consolidate Ola’s position as the market leader in the Indian ride-sharing space.

Ola incurred a consolidated loss before taxes of $360 Mn (INR 2,313.66 Cr) in FY16, as per regulatory filings with the Ministry of Corporate Affairs. A year earlier, the company’s losses were about $123.9 Mn (INR 796 Cr).

Uber – Xchange Leasing

On the other hand, Ola’s chief rival, 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 had invested $6.4 Mn (INR 43 Cr) in Mumbai-based car leasing firm Xchange Leasing India Pvt. Ltd, between January and March.

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%. This tax rate varies depending on the type of car. Earlier the tax rate was only 14.5 %.

Uber – Ola: Fight For Top Spot

As per a report by research and advisory firm RedSeer Consulting, the online mobility industry witnessed a supply crunch situation. This is largely due to continuously dropping incentives and driver incomes.

Both Uber and Ola are fighting for the top spot neck-to-neck. Earlier this month, Uber poured $7.99 Mn (INR 51.64 Cr) into Uber India. In June 2017, Uber’s arch nemesis in the country, cab aggregator Ola picked up about $50 Mn funding from hedge fund Tekne Capital Management, as an extension of its ongoing round. This funding took the total fundraising by the cab aggregator to $2.4 Bn.

In 2016 alone, more than 150,000 cars were collectively put on the Indian roads by both the cab aggregators. However, as more drivers joined the platform the companies resorted to a reduction in incentives. As per a report by research and advisory firm RedSeer Consulting, the companies have reduced driver incentives by 30%-40% in the quarter ending March 2017. This decrease percentage was in comparison to the earlier quarters. The cut was reportedly done to focus on unit economics.

Other players in the online mobility segment apart from Uber and Ola include ride-sharing startups like Ryde and Bla Bla Car. Other startups in this segment are self-driven rental car services like Voler and Zoomcar, inter-city taxi service Wiwigo, Delhi-based TaxiVaxi, and bike taxi operator Rapido, among others.

(The development was reported by Financial Express)