Tiger Global To Sell A Portion Of Its Stake In Ola To Softbank For $500 Mn

Now that Tiger Global Management Partner Lee Fixel has stepped down from Ola’s board, the US-headquartered firm seems to be ready to sell its stake in the cab aggregator to none other than SoftBank. As per a recent report by Business Standard (paywall), the Japanese investment behemoth is currently in final stages of acquiring an additional 10%-12% in ANI Technologies, the company that owns and operates Ola.

If the deal between SoftBank and Tiger Global goes through, the former might become the largest shareholder in the ride-sharing startup.

According to sources close to the development, Masayoshi Son-led Softbank is looking to buy out a portion of Tiger Global’s stake in Ola for somewhere around $400 Mn-$500 Mn. The latter currently holds a 15% stake in the homegrown cab aggregator.

Talks of SoftBank holding discussions with Tiger Global about a potential buyout first surfaced in May this year. At the time, it was stated that SoftBank was looking to buy Tiger Global’s stake in Ola for about $700 Mn.

Interestingly, SoftBank made a similar move in another Indian unicorn, Flipkart, earlier this year. Following the fallout of merger talks between Snapdeal and Flipkart, the Sachin Bansal and Binny Bansal-founded ecommerce giant secured a $2 Bn+ funding from SoftBank Vision Fund, as an extension of the $1.4 Bn financing it picked up in April from Microsoft, Tencent and eBay.

At the time, it was reported that around $500 Mn out of the total investment was to paid to Tiger Global by SoftBank, in exchange for one-third of its shares in Flipkart. Prior to that, the US-based hedge fund held a 28% stake in the ecommerce platform.

Why Is SoftBank Betting On Ola?

Founded by Bhavish Aggarwal and Ankit Bhati in January 2011, Ola is currently present in 110 cities across the country. Its wide array of services includes online booking of auto-rickshaws and bikes, as well as vehicles. It has also come up with a connected car platform for ridesharing called Ola Play.

Till date, Ola has raised funding of $3.9 Bn in 11 rounds from about 20 investors.The funding round of $350 Mn raised in February 2017 took its valuation to about $3.5 Bn. Later in June, the cab booking platform reportedly picked up about $50 Mn funding from hedge fund Tekne Capital Management, as an extension of its ongoing round.

In October this year, the ride-sharing startup confirmed a $1.1 Bn investment in a round led by Tencent Holdings Limited, in exchange for a 9.75% stake. In the official statement, Ola also revealed that it was in advanced talks with other investors to close an additional $1 Bn as part of the same financing round, taking the total fundraise to over US$2 billion.

Tiger Global has been on Ola’s board since March 2012, when it led a Series A funding round in the cab aggregator. Its last investment in Ola was made in November 2015, when it participated in a $500 Mn Series F round along with Baillie Gifford, Falcon Edge Capital, SoftBank Group, DST Global and Didi Kuaidi.

Is A Merger Between Ola And Uber On The Cards?

As is evident from its diverse investment strategy, SoftBank is casting a wide net with massive bets on companies across the globe like China-based WeWork, Nvidia, ARM, OneWeb, SoFi, digital payments giant Paytm and Boston Dynamics, among others.

The Japanese firm has now set its eyes firmly on the booming ride-sharing market and has already finalised a $1 Bn investment in global cab aggregator, Uber, along with a clutch of global backers. As part of the agreement, Softbank and other investors would be buying additional $9 Bn in shares from existing backers.

Long before speculations of Softbank’s funding in Uber surfaced, SoftBank Vision Fund CEO Rajeev Misra had indicated the Japanese conglomerate’s intentions towards making peace between rivals Ola and Uber. In a media interaction in September, Misra had stated, “We own more than 30% in Ola and we would own much less stake in Uber. We have owned the stake in Ola since 2014 and it does send conflicting signals. But we are hoping that we make peace between them at some point.”

For SoftBank, the main focus at the moment is on attaining largest stakeholder status in Ola. If Tiger Global decides to sell a portion of its shares in the cab aggregator for $500 Mn, will we witness the merger of Ola and Uber soon?

Update 1: 22 Nov, 2017, 1:06 pm

A Softbank spokesperson sent the following response – 

“Ola is a strategically important investment in our global portfolio. Softbank is happy to partner with them in their mission of building mobility for a billion Indians. We are confident that our support will help them grow and become one of India’s most valuable companies.”