Japanese conglomerate SoftBank, which has been an investor in most promising startups in India, is currently forging a way to increase its share in the homegrown cab aggregator Ola. The official route for this would be to get Ola founders viz co-founder and CEO Bhavish Aggarwal’s approval.
As per reports, SoftBank is in talks to buy Ola shares from Tiger Global.
Last year, Bhavish Aggarwal had blocked such proposed deal where it was reported that US-headquartered hedge fund was gearing up to sell a portion of its stake in the cab aggregator to SoftBank for somewhere around $400 Mn-$500 Mn. At the same time, in November 2017, Lee Fixel, Partner at Tiger Global Management resigned from Ola’s board.
A few months earlier, Ola amended its Articles of Association to include a clause to prevent SoftBank from buying more shares in Ola without approval from the company’s founders and board.
At present, Tiger Global owns 16% stake in Ola, while SoftBank owns 26-27% in the company.
Till date, Ola has raised funding of $3.9 Bn in 11 rounds from about 20 investors. In October 2017, Ola raised $1.1 Bn investment in a round led by Tencent Holdings Limited, in exchange for a 9.75% stake.
SoftBank denied to comment on speculations, while Ola spokesperson said:
“Ola’s shareholders are fully committed to the company and are strong backers of Ola’s founders in their mission. Ola’s shareholders are reputed global institutions and we can unequivocally assert that none of them will do anything which violates their contractual agreements and contravenes Indian laws. Ola is focussed on fulfilling its mission of building a global institution every Indian is proud of; will not be detracted or drawn into useless speculations.”
From a legal point of view, such proposed sale of share is unlikely as it is prohibited in Ola’s AoA.
Ola’s board comprises the following: Bhavish Aggarwal, co-founder Ankit Bhati, SoftBank’s David Thevenon, Tencent’s Brent Richard Irvin, Matrix Partners’ Avnish Bajaj, former Vodafone executive Arun Sarin and T.V.G. Krishnamurthy, who is close to Aggarwal.
Furthermore, SoftBank has the right to appoint one more director “provided that such person is reasonably acceptable to the founders, and all other shareholders”.
However, according to Ola’s AoA SoftBank’s right to appoint a second board member will not apply if the Japanese company ends up owning 50% or more of the preference shares in Ola’s ongoing funding round.
From a layman’s perspective, it is to be noted that with a stronger board, a CEO gets a limited say in the functioning of the company. With SoftBank being a major investor in companies like Flipkart, it is to be understood that it has been playing in the Indian market on its terms.
One of the biggest examples of a strong board leading the company can be of Apple, where Steve Jobs was forced to leave the company. In Indian perspective, the step down of Sachin Bansal and Binny Bansal from Flipkart’s operations still looks a little hazy. With this, if Bhavish Aggarwal has been strongly refuting more inclusion of deep-pocketed investors like SoftBank, it can be largely attributed to the founder and CEO’s wish to call the shots in the company.