30 Under 30 2024

Ola's ready to race ahead of the curve

Bhavish Aggarwal and Ankit Bhati are combating regulatory hurdles and competition from Uber: After all, 300 million trips—India's daily demand—is the prize, and Ola wants to win most of it

Harichandan Arakali
Published: Jun 20, 2016 06:14:43 AM IST
Updated: Jun 14, 2016 04:24:30 PM IST
Ola's ready to race ahead of the curve
Image: Mallikarjun Katkol for Forbes India
Bhavish Aggarwal (left) and Ankit Bhati, co-founders of Ola, were on the lookout for opportunities since their IIT-Bombay days

Bhavish Aggarwal is no longer trying to sell a white-water rafting trip in Haridwar. That is so 2010, when he had just entered the world of enterprise with Olatrip.com, a “travel agent” or so his parents had alleged at the time. Instead, having successfully set up one of India’s most valued startups, he is fighting for the lion’s share of an estimated 300-million trips being taken by India—daily. He may have the first-mover advantage, but Aggarwal’s Ola, the homegrown cab-aggregator and investor favourite, will not have a smooth ride to supremacy. It will have to contend with regulatory impediments and, of course, that four-letter word: Uber.

Run by ANI Technologies Pvt Ltd, of which Aggarwal is co-founder, CEO and director, Ola is considered the leader in the fledgling cab-hailing market in India. The company moved base to Bengaluru in 2012 from Mumbai, where the business had been started. In 2015, Ola acquired early competitor TaxiForSure in the Karnataka capital for $200 million in cash and stock. That effectively set Ola up as the largest local player against California’s Uber Technologies Inc, which entered India in late 2013, and sees the market as the biggest after the US and China by number of cab rides.

Didi Chuxing, which dominates the Chinese cab-hailing market, said in March that it has an 87 percent market share in China, and that it fulfils 11 million rides a day, according to a Reuters report. Ola does more than a million rides daily, Aggarwal said in a CNN interview on May 18. The Indian startup gets up to 3 million requests on “peak days”, which happens a few times every month, but the number of rides it can actually fulfil on such days is lower, COO Pranay Jivrajka tells Forbes India. Ola reaches over a 100 cities, with a network of about 450,000 vehicles, including cabs (primarily), autorickshaws and Mumbai’s kaali-peelis, or the black-and-yellow taxis. “We are profitable in many cities or in specific segments in some cities,” Aggarwal says. He won’t say how many is “many”. 

We are meeting in the Ola office, on the 5th floor of one of the “tech parks” off Bengaluru’s Intermediate Ring Road, connecting the central commercial area of the city to Koramangala, once a wetland and today home to the city’s many tech entrepreneurs. Around 350 employees work on just the one floor. Anyone entering the reception area will be greeted by intense table tennis matches or aggressive table-football sessions; once inside, upbeat mottos like “own your action” are painted on the walls. Hospitality includes ginger chai from a Chai Point outlet within the office. Next door, Ola has several hundred more staffers in another glass-and-metal building that also houses the offices of Goldman Sachs.

Aggarwal had just returned from a week in New York and San Francisco a couple of days before meeting Forbes India, where he had attended his brother’s graduation from the University of Illinois. He was interviewed on CNN while in the US and he found that “the whole excitement about India is new and the excitement over internet in India is even newer. It’s a curiosity for them right now; they are interested in learning more.”

Aggarwal manifests the confidence of a well-funded, highly-valued venture that has, in its short life, moved from struggles with finances to having its pick of suitors. Consider the time when, after their “Series A,” or first major round of funding, Aggarwal, who is a Forbes India 30 Under 30 alumnus, and co-founder Ankit Bhati, had struggled to garner additional funding. Today, ANI Technologies has raised a total of about $1.3 billion in venture funding from investors, including Japanese telecom and internet company SoftBank Group Corp, venture capital firm DST Global, and Didi Chuxing, China’s largest ride-sharing service provider, which is also part of an airline-style alliance with Ola, Malaysia’s GrabTaxi and Uber’s US-based competitor Lyft.

Company executives won’t quarrel with media reports that Ola is valued at around $5 billion following the latest round of funding. That $500 million round, announced in November 2015, is their biggest known to date, helping the company expand rapidly and further strengthen its technology even as Uber rolls out its plans to spend over a billion dollars in India.

Having quit a researcher’s job at Microsoft two years after graduating from the Indian Institute of Technology (IIT), Bombay, Aggarwal had started Olatrip.com with the intention of selling weekend holidays. That idea didn’t pan out, but could Olatrip organise cabs, customers asked him and his fellow IITian Bhati. And the following year, “we pivoted to having outstation rental cars,” Aggarwal shrugs.

At a cursory glance, Aggarwal’s family doesn’t hold out any clues for his fierce entrepreneurial turn. His parents are doctors, based in Ludhiana, Punjab. “The big worry was [after becoming an entrepreneur] how will I get married… I think my father almost disowned me for a year,” Aggarwal, 30, recalls. He took care of that problem himself in 2014, marrying his girlfriend of eight years, whom he had met at a rock-climbing camp in his second year at IIT-Bombay.

Ola's ready to race ahead of the curve
Image: Joshua Navalkar
Ola is constantly upgrading its offering and has something for everyone, from the economicalMicro to the luxurious Lux

Aggarwal has also put to rest any worries about his professional career: From being the one-man call centre agent for his own holiday-booking company to building one of India’s most-valued startups and the leader in the country’s fledgling ride-hailing market, he has evolved into an ambitious entrepreneur.

Today, he and Ola are set for their next stage of growth. While Bhati, co-founder and CTO, is obsessing over turning the technological underpinnings of Ola into a strong “platform to serve a billion people,” Aggarwal has put together a team of A-listers from Nokia, Microsoft, Flipkart, Rocket Internet, LeasePlan and Infosys, among others, collecting the talent he needs to propel the startup to its next orbit. They have built new services such as Ola Micro—a Rs 6-per-kilometre cab service; Wi-Fi on Ola Prime; Ola Share, for those willing to share their ride and the fare; Ola Shuttle, for rides on mini buses; and a luxury service, Ola Lux. Their app supports nine local languages and counting: “What should we do next, maybe deliver content?” says Raghuvesh Sarup, a senior vice president at Ola and its head of categories—he is the point person for each of the different services the ride-hailing app company offers. Sarup is also the company’s chief marketing officer.

He has delivered multi-billion dollar projects at Nokia and then at Microsoft over a career spanning 20-plus years, including a stint at Procter & Gamble selling Camay soaps. He is a strong believer in building Ola’s business units into a cohesive whole that is greater than the sum of its parts. That means, when an Indian consumer thinks of Ola, he/she must be aware of everything from the autorickshaw option to the luxury sedan, with Wi-Fi as “today’s novelty, tomorrow’s hygiene”. “Think of Ola as a brand house, not a house of brands,” Sarup says. “That is what we want to build.”

Bhati, 29, who is about a generation younger than the 45-year-old Sarup, offers another perspective: “See if electricity is there and it’s working perfectly, no one particularly appreciates it… but if it goes off, that’s when you feel it.” He wants Ola to become just as ubiquitous a utility—always present, completely unobtrusive and massively effective, ferrying hundreds of millions of people every day.

Before that, Ola has to contend with formidable competition from Uber Technologies, which has made India a priority market. Uber is just as determined to establish itself in India as Ola is to hold on to and consolidate its lead. Even though Uber is present in only 27 cities in India, versus Ola’s 100-plus, it has targeted top-tier markets, and today has 350,000 “driver-partners” in India. It is also “very close” to fulfilling a million rides a day, Uber said in an email to Forbes India.

Uber, with its deep pockets, has invested in its own operations centre in Hyderabad and has, more recently, opened a local engineering centre in Bengaluru—its first in Asia, CTO Thuan Pham pointed out when he flew in personally to inaugurate the centre in March. There was no cap on how many people the centre could hire; that would only depend on the growing scope and size of the work planned for the centre, he had said. For starters, the Bengaluru team will be “the tip of the spear” for Uber’s innovations for the local market, Pham said at the inauguration.

Now, there are two sides to this ever-burgeoning rivalry between Ola and Uber. One, it is creating micro entrepreneurs out of tens of thousands of drivers across the country, helping them get bank loans for new cars so that they can join one of the networks. Consumers are getting not just subsidised fares in quality vehicles, but are the beneficiaries of one-upmanship promotional activities: Take, for instance, lotteries to decide who gets to meet popular Bollywood stars at their movie launches, or cricket legends such as Sachin Tendulkar.

The other side of this competition is less pleasant. In fact, it has the makings of an increasingly public and ugly spat that has already resulted in a lawsuit. In March this year, Uber accused Ola of directly tampering with its business in India, with a host of complaints, including false bookings. The litigation is ongoing and will next be heard in July. “We think that the allegations are frivolous. We’ve categorically denied it to the honourable court. We also have this sense, or we speculate rather, that this is a reaction to another case that was filed by Ola against Uber for violating a court order,” says Anand Subramanian, Ola’s director for marketing communications.

Subramanian is referring to a ban on diesel vehicles in the National Capital Region of Delhi, which required diesel cabs to be taken off the roads by April 30. Unbearable air pollution in Delhi has triggered massive public anger, pushing authorities to mandate the use of CNG vehicles. As a response, Ola conducted a ‘mela’, called Ola Pragati Mahotsav, and invited drivers on its network to trade in their diesel cars for CNG vehicles. The company would spend as much as Rs 200 crore to make the switch, it had said in March.

Amit Jain, president of Uber India, says that the impact of this ban hasn’t been significant on his company because “this was a dialogue that was happening for quite some time”. “Over the last several months, our team made a concerted effort to bring on board more and more cars with CNG, and to help driver partners with existing diesel cars to sell them or get other cars with CNG; this has happened over the last six months,” he tells Forbes India.

Ola's ready to race ahead of the curve
Though this problem has been dealt with for now, Ola and Uber would be waiting to see whether this ban gets extended to other cities by the National Green Tribunal.

The other ongoing battle has been over surge pricing (Uber) or peak pricing (Ola), a practice that doesn’t smell better with either name, for the customer or—in cases like Delhi which has imposed the odd-even traffic regulation—the local authorities. This dynamism in rates, though, has been around in one form or the other in many industries; airlines, for instance. But the cab aggregators aren’t rattled by it. In the long run, Ola wants to make peak pricing more “granular,” where you could have peak pricing around a cricket stadium, say, but not two blocks away.

They also contend that the benefits largely go to the driver: There is no change in the 20 percent share that Uber currently takes from the fare on each ride, Bhavik Rathod, general manager for Uber’s south Indian operations, told Forbes India in an interview in March. This is another way to coax more drivers to move towards a location of high demand and ensure people get cabs sooner rather than later, Rathod pointed out.

Both Ola and Uber are working closely with the government to resolve all issues because there is a market, ripe for the picking with low car ownership, at stake—one that can some day rival China’s. A sense of the opportunity in India can be gauged from this: Against the 1 million-plus rides Ola does a day, some 8 million commuters travel on local trains in Mumbai alone, around 2.7 million on the Delhi Metro and about 5 million people on buses run by the Bangalore Metropolitan Transport Corporation.

“India is a very strategic market for Uber globally,” says Jain, who was formerly the president of Rent.com in the US, making him a high-profile hire and underscoring the importance of India for Uber. “From an investment, engineering, focus and opportunity perspective, it [India] is absolutely huge. The majority of people in the Uber global leadership team have visited India over the last six months.”

While Ola has built a strong brand and is continually improving the process by which it recruits drivers into its network from even the country’s hinterland, Uber too has a window of opportunity, the technology and the money to garner a significant share in India. Also, the market is so nascent. India’s public transportation market is estimated to be between $6 billion and $9 billion, but the ride-hailing companies have about five percent of that.

Further, Uber and Ola could be “pretty neck and neck”, especially in the big cities, Jaspal Singh, co-founder of transportation sector consultancy Valoriser Consultants in New Delhi had told Forbes India in an interview in March.

The competitive landscape, while dominated by Ola and Uber, is varied. Meru, though, a distant third at 20,000 cabs, is becoming increasingly innovative: Starting June, it is offering customers the option to book its cabs via Facebook. There are other new-age competitors too, including BlaBlaCar, a French company offering community-based rides. It has recently raised more money and is looking to expand its services in India. There are also niche players that have specifically chosen to manage fleets of cabs on behalf of large business customers, such as Bengaluru’s MoveInSync.

“Of course, if you ask Bhavish, he strongly believes that this is a winner-takes-all business and that Ola will be the winner,” Avnish Bajaj, managing director at Matrix Partners, one of the early investors in Ola, says. “However, in markets such as India, it is possible that an eventual duopoly could exist, with a 60:40 or 70:30 share.” Whatever that ratio, it will, however, clearly be in Ola’s favour, he feels.

What will be critical to stay ahead in the race is supply-creation, even in the face of regulatory limitations. “Sir, I’m going to switch off my phone. Please say you’ve hired a private taxi if the police stop us,” one driver recently said during one trip in Bengaluru. “I just got a WhatsApp message; they are stopping cabs and fining us.” The Karnataka state government’s transport department has given both Ola and Uber an ultimatum to meet local rules on getting city cab permits or stop operations.

The Union transport ministry, in October last year, released a comprehensive set of guidelines that recognised the need to treat ride-hailing app services as a new business model, which required its own set of forward looking rules. However, individual states aren’t bound by the ministry’s recommendations and can choose to adapt the guidelines, or write their own rules as Karnataka has done.

That said, states recognise the value and popularity of the cab-hailing app services—for instance, Bengaluru is said to have not enforced its rules rigidly when the recently concluded Indian Premier League finals took place in the city—and unlike in the West, there is no great tussle between operators and cab-service providers in India. “Net, net, has there been any disablement? No. I don’t believe regulations are a hurdle,” says Matrix’s Bajaj.

Ola's ready to race ahead of the curve
“The most important focus for us is to create the supply because India never had a legacy of a large-scale taxi network. We had an autorickshaw service. There was no medallion taxi network, unlike New York or San Francisco or Seattle,” Aggarwal says.

Ola employs around 8,000—from hardcore engineers, data scientists and category specialists to an army of field executives that does everything from conducting melas, or expos to enrolling drivers. For now, Ola still largely relies on word-of-mouth to recruit its drivers, but, where needed, it also initiates targeted ad campaigns.

At one of its most recent melas— in a typical week, there is always a mela happening somewhere in India —some 25,000 visitors participated in Bengaluru, Ola’s Subramanian says. The melas will have someone at hand to answer every question a driver might have and take care of potential hiccups he might face. Even if someone walks in without a driving licence, help will be at hand and, at the least, the process will get started.

The company has a 24x7 processing centre in Bengaluru that is a one-stop-shop for drivers, from simple things like a broken smartphone screen to training on local rules and safety. “We have a turnaround time of eight minutes at the centre,” COO Jivrajka says.

Jivrajka was two years junior to Aggarwal and Bhati at IIT-Bombay, and didn’t know them then. He chucked a job at Illumine Labs, a consultancy, to join them in a one-room garage with a roll-down shutter door in Mumbai’s Bhandup suburb. Cranking up that door was often his first task at work, as he would turn up early. “Illumine Labs helped people become more self-aware, and it was one place where I felt I should have been paying them rather than they paying me a salary,” Jivrajka recalls. Still, he traded that to become the first employee at Ola, selling the outfit’s car-rental service and manning its call centre.

An event management company was their first big break, when it asked for around 120 cabs over a period of four days. Bhati had rigged up some software that could help with the allocations, but it was all still quite manual and nothing fancy. This was in 2011-2012.

The idea of hailing a cab using a smartphone in real time wasn’t something they would think of for at least another year to 18 months. It was only after cheap Android-based smartphones flooded the market over the last two years, with modest improvements in 3G networks and a fledgling 4G network taking root, that smartphone-based services have become common in India.

One of the earliest recollections Bhati has of Uber is when it was reported to be tying up with Google to provide employee transportation. Uber, which was founded in 2009, was also Google Venture’s biggest investment, when it put in more than $250 million in the startup in 2013 and more again the following year. “We had heard of it in that context, and around the time we were gaining speed, Uber was being reported more and more in mainstream media —then we figured out, oh, f#@$, this guy is rapidly expanding.”

There was much excitement around the Uber launch in Europe in mid-2012; at the time, Ola was “still a website and call centre” outfit focussed on its rentals business. In fact, Ola went “app-only” only by August 2015, when the company saw that 99-percent plus of the bookings on its network were coming on the app. (Although Ola had a driver app earlier on in 2012, its modern avatar, with more robust features and functions that both drivers and users could rely on, only took shape towards the second half of 2014.)

When Uber entered India in the second half of 2013, the sense may have been that Ola as an incumbent had a head start, recalls Bhati, but it was really Uber that was the mature player entering a new market: “The technology that they had built, the product that they had built, it had been perfected, right? It would be a little like today’s Ola entering a new market, because now Ola is a sound technology platform.”

“We were still tiny [at the time Uber entered],” Subramanian points out. Starting in a new city basically meant him and COO Jivrajka flying there to set up. “I was often the translator, especially in the south,” he adds. At the time, Ola was still making only around 2,000 to 3,000 bookings a day.

Bhati makes no bones about where they were placed: “The problem we had was the disadvantage of the [lack of] technical depth, essentially. Our base systems were created for a very different reality—it was like using a bullock cart on a race track. That was the place we were in.” In the next year to 18 months, he adds, “we would have grown by 50-100 times”.

Ola's ready to race ahead of the curve
In that period, there was plenty of time to make mistakes and lose ground, which they also did. “There were so many missteps and wrong decisions that we’ve made along the way, and we learn every day at every level—that is the essence of entrepreneurship. You need to make mistakes fast and course correct fast,” Aggarwal says.

“If you take too long to make mistakes, you lose time, which is the most precious commodity,” he says. For example, Ola had first launched its Ola Money wallet in 2014. It was one of the first e-wallets in the country, albeit a “closed-loop” one, meaning users could pay for their rides with it and not much else. “But then we shut it down because we were not clear on the regulatory aspects. And what ended up happening was that when Uber launched in India, they had the card-on-file option.” India’s rules on two-factor authentication didn’t allow that but “a lot of people noticed them because they had a better payments experience, and not necessarily because they had a better fundamental cab experience,” Aggarwal says. “We lost, I think, six-eight months there because I think we didn’t move fast enough from that.”

Ola relaunched its wallet eventually, with more features, late last year. “Had we done that much earlier, people would have never even caught on to Uber and felt, oh, it’s a great payments experience,” he says. “The learning is, you need to execute on these ambiguous things faster. Ambiguity should not mean go slow.”

They have taken that lesson to heart, and in the last six months to a year, the company has launched many services and features, and is set to add more. As mentioned earlier, Ola Micro became an instant hit with the ride-hailing public. The service offers rides at just Rs 6 a kilometre, subject to a minimum fare and the additional per-minute charges added on. On the more pricey Ola Prime service, the company now offers a 4G-based Wi-Fi option. Log in the first time using the same Ola user credentials and use the Wi-Fi free for the entire duration of the ride. On subsequent rides, the user is automatically recognised and there is no hassle of logging in again—anywhere in the country.

Then there is the option to share your ride and its cost with others. “Now we are coming up with products where the driver has to not even go to the customer’s location; he’ll get customers from the location where he is in most of the cases,” Jivrajka says. “These are things that sound like very simple tweaks, but they have a huge impact on the number of customers that we can serve.” Today the platform gets over a million requests each day, and up to 3 million on peak days, he adds. Jivrajka explains “peak day” as one where the combination of a variety of reasons, often involving multiple cities, creates very high demand. “But the kind of fulfilment that we do is fairly low as compared to what the demand is.”

The company has re-entered the rentals business, starting in Delhi and Jaipur—with plans to launch in many more—and “life comes full circle,” observes Bhati, referring to Ola’s initial foray in outstation rental cabs.

Bhati, who was born in Jodhpur, is also representative of an India that has no precedence—one that is being built by young, first-generation technology entrepreneurs. His father is in the administrative service in Rajasthan, and like Aggarwal, Bhati credits IIT-Bombay with providing them the exposure to industry and established industrialists and entrepreneurs, which inspired them to build something of their own.

They were in the same hostel and were always looking for some freelance project or the other, attending events and competitions, he recalls. Therefore, after finishing his “dual-degree” programme, earning an MTech, joining Aggarwal was a natural next step. “Even back then we felt it, that we had a once-in-a-lifetime opportunity to change the course of society,” Aggarwal says.

Their mission statement has now crystallised into building “mobility for a billion Indians.” With mobility comes economic opportunity, and in India, people will not need to go through the whole phase of everybody buying a car, having a lot of pollution and lot of congestion, he points out. “Our country can just skip that. I personally don’t own a car, and I don’t miss it. I live my life with a lot of freedom.”

(With inputs from Deepti Chaudhary and Shutapa Paul)

(This story appears in the 24 June, 2016 issue of Forbes India. To visit our Archives, click here.)

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  • Vinay

    Good Going Ola. Uber is a real competitor but innovation and understanding the needs of Indian market can give you edge. Hire Innovator, add Spice in Ola.

    on Jun 21, 2016