India’s largest ride-hailing startup, Ola, is in talks to raise about $600 million and may close the deal by year end, as it seeks to counter an increasingly aggressive Uber Technologies Inc in the coveted India market, according to a person familiar with the matter.
The funds are coming from new and existing investors and would give six-year old Ola enough capital for at least 18 months, said the person, asking not to be named because the talks are private. Negotiations are ongoing and the amount raised or timing may still change. SoftBank Group Corp., a current investor, plans to participate and may lead the funding round, the person said.
The fundraising would be a record for India this year and intensify the fight between ANI Technologies Pvt’s Ola, last valued at $5 billion, and Uber, the world’s best-funded technology startup with a valuation of $69 billion. Ola, backed by SoftBank and Tiger Global Management, could use the funds to speed up its spending on recruiting drivers and helping them lease vehicles. It would also allow Ola to expand geographically as it tries to maintain its lead over Uber, which has increased investments in India after agreeing to sell its money-losing China operation.
“Funding is critical for Ola to keep its momentum and maintain its market leadership in the $10 billion ride-hailing market which is readying for its next phase of expansion,” said Jaspal Singh, a partner at Delhi-based transportation consultancy, Valoriser Consultants. “Uber has even deeper pockets now that it is out of China, which was a big drain on its resources, and it will now focus on India in a big way,” he said.
The funding round come during a long dry spell in the world’s third-largest startup market. India’s technology startups raised $4.23 billion in the first three quarters of this year, less than half the total for the same period of 2015, according to researcher Preqin. Ola’s other investors include DST Global, Accel Partners and Sequoia Capital.
Dilapidated public transport infrastructure in Indian cities and the lack of convenient transport options has helped on-demand ride-summoning startup Ola and its San Francisco-based competitor to expand at a rapid pace. They are now vying with each other to woo customers like government departments and train passengers, as well as make it easier to bring new drivers on to their platforms. For instance, Ola and Uber have tied up with automakers like BMW, Tata Motors and Maruti Suzuki to lease cars with attractive and affordable financing options.
As smartphone usage soars in India, both are burning cash to attract drivers and riders with incentives — making funding a key component in the battle.
Ola’s founder and CEO Bhavish Aggarwal said in an interview this summer that Ola with a million rides daily is ahead of its competitor and is rolling out innovations at a rapid clip. It recently allowed customers to book Ola rides offline, a boon in a country with poor wi-fi connectivity and expensive data plans.
Aggarwal did not respond to an e-mail about the upcoming funding round. A spokeswoman for SoftBank responded saying they are “unable to comment on speculation on fund-raising efforts.”