Forbes India 15th Anniversary Special

Ola's fundraise gives it an edge over Uber India

With ample cash to match Uber's war chest, Ola is on course to expand its lead over the San Francisco-headquartered rival

Sayan Chakraborty
Published: Oct 9, 2017 11:46:00 AM IST

Ola's fundraise gives it an edge over Uber India
Image: Joshua Navalkar

The app-based taxi war in India has become even fiercer with homegrown unicorn Ola bagging a $400-million breather from China’s Tencent, taking total funds raised in the last 12 months to about $800 million. Softbank and Ratan Tata’s UC-RNT fund are among the others investors to back Ola in the past year.

Arch-rival Uber, the most valuable startup globally at $70-billion, can no longer afford to just sit back and take note.

When Ola hit the markets in June last year to raise fresh funds, it wasn't the best of times. A lack of returns had made investors wary of Indian startups. Ola, the market leader, was also caught in the quagmire and saw its value erode from a peak of $5 billion in 2014 to $3.5-4 billion.

Nevertheless, it ended up bagging enough funds to turn the tables on Uber. According to a recent report by Bloomberg, the $800 million is part of a larger round that could go up to a whopping $2 billion.

The fresh funds and the turbulence at Uber headquarters in San Francisco – founder Travis Kalanick has been forced out of the chief executive’s role by investors, and former Expedia executive Dara Khosrowshahi has taken over as chief executive – have provided Ola an opportune moment to step on the gas and expand its lead on Uber.

To be sure, Ola has consistently held fort against Uber. Though the companies have traditionally sparred over market share numbers – Ola, in the past, claimed three-fourth market share in the country – industry executives say Ola’s share stands at about 60 percent. According to them, Ola is well-positioned to lead the land grab.

Flush with funds, the company can afford to match Uber’s war chest and splurge on incentivising consumers and drivers both. Unfortunately, in a discount-driven market such as India, the war for market share is a price war more than anything else. As they stand now, Ola can play that game better than Uber.

Besides, it offers consumers a wider choice, be it cheap hatchbacks, sedans, a subscription service for both sedans and ride sharing, autos and even vehicles for outstation travels. Unlike Uber, Ola is also focusing on consumer experience with Ola Play, an in-car entertainment feature.

The company is reportedly looking to start operations outside India in some of the neighbouring countries.
The industry, however, believes that the fate of the ride-hailing segment in India will somewhat depend on the machinations of SoftBank, an investor in Ola which is also in final stages of talks to invest in Uber.

While Uber sold its China business to Didi Chuxing last year after burning more than a billion dollars in the country without much headway, it is still a tough competitor to Ola. In fact, Uber executives have gone on record on several occasions, claiming how India is a key market for the app-based riding platform, and that the company will go all guns blazing to topple Ola from the pole position.

Ola is one of SoftBank’s few India portfolios that has delivered on its promise. In December last year, Masayoshi Son, during an India visit, had identified Ola as a catalyst for driving electric vehicle usage in India.