Ola, the home grown taxi aggregator, is in the final stages of raising a fresh round of funding in the $500 million range as it refurbishes its war chest to ward off competition from its rival Uber. The deal is expected to be closed in a month’s time.
Ola, which raised $500 million in November last year is likely to receive this fresh funding from its existing set of investors, sources told FE. The taxi aggregator founded by Bhavish Aggarwal has cumulatively raised $1.2 billion since its inception, with backing from marquee investors such as Tiger Global, DST, Softbank among others.
Ola did not respond to the e-mail sent by FE seeking their response to this development.
The funding will be a much needed boost for Ola, in the wake of Didi Chuxing acquiring Uber’s business in China.
This could potentially mean Uber devoting further resources into India. Ola’s last round of funding was raised at a valuation of $5 billion.
Ola and Uber have been engaged in an intense competition in the Indian cab aggregation market with an estimated 1.2 million rides per day through deep price cuts. The deep discounting business model of the taxi aggregators has seen an estimated $40 million cash burn rate by Ola on a monthly basis, according to people familiar with the situation.
This has been despite Ola having a marketshare of 50% as compared to Uber’s 27%, according to RedSeer Consulting, the firm which tracks this segment.
However, this business model has had a bearing on Ola’s financials. For FY15, the taxi aggregator registered a revenue of Rs 380 crore which was a seven fold increase over last fiscal even as the losses rose 20 times to touch R754 crore. This fresh round of funding is expected to help Ola in maintaining its dominant market share.
Source told FE that Ola has got a mass market appeal as compared to Uber which is seen as a premium brand. Uber has also promised further investments into its India operations. The global taxi aggregator raised $3.5 billion from Saudi Arabia government in June this year, of which a substantial portion is likely to be invested in India.
“This investment is part of global fund and we are incredibly excited to use this capital in our globally strategic markets like India. Having grown exponentially over the last two years, we are bullish on the Indian market and this investment will support the remarkable growth of Uber in India,” an Uber Spokesperson said.