Leading cab aggregator Ola on Wednesday officially confirmed that it has raised $1.1 billion in a funding round that was led by Chinese internet giant Tencent, along with existing investor SoftBank of Japan and others. Ola also said that it is in advanced talks to raise another $1 billion from various investors, bringing the total funding round to just over $2 billion. The fresh round of funding will value Ola at almost $7 billion and fortify its efforts to take on market rival Uber.
Ola said it will make significant technology investment into artificial intelligence and machine learning capabilities to solve the country’s unique mobility problems, with the help of the new round of funding. According to research firm Kalagato, in the first six months to June, Uber grew its market share in India to 50% while rival Ola pocketed 44.2%. It will also look to expand into more cities from the current 110 locations.
The funding comes at a time when Uber is embroiled with some internal battles, which led to founder Travis Kalanick stepping down. It also had to face a reversal in London, where its licence was revoked. While Uber has reiterated its commitment to the Indian market, Ola will likely have some leeway till such time Uber sorts out its internal hiccups. SoftBank is also said to be inching closer to seal a deal with Uber and the prospect of having a common and a big investor like SoftBank on board can give the competition in the Indian cab aggregator industry an altogether different dimension.
The new investment will come in handy at a time when the industry is seeing a drop in driver incentives and a fall in the number of drivers registered on the platforms. Ola had reported a sevenfold jump in its revenue to Rs 758 crore in FY16, but incurred a loss of `1,760 crore for the same year on the back of heavy discounts offered to passengers and incentives to driver partners. Ola is yet to report its annual financials for FY17.
On the other hand, Uber is valued at around $70 billion. According to an analysis by App Annie, Ola had a slight lead over Uber in May with 5.9 million monthly active users (MAUs) compared with Uber’s 5.5 million MAUs.
Ola co-founder and CEO Bhavish Aggarwal, while announcing the deal, said, “The transportation and mobility industries are seeing huge changes globally. Our ambition is to build a globally competitive and futuristic transportation system in India.”
The Indian start-up ecosystem has enjoyed big-ticket funding rounds this year. Apart from Ola, both Paytm and Flipkart had raised huge funds recently. While Flipkart raised $1.4 billion from Tencent, eBay and Microsoft, and another $2.5 billion from SoftBank, Paytm raised Rs 1.4 billion from SoftBank.