In a new high for the Indian online taxi industry, Ola on Monday announced the acquisition of cross-town rival TaxiForSure for $200 million, making it the biggest acquisition in the domestic consumer internet space after Flipkart’s acquisition of online fashion store Myntra last May.
Much like Flipkart and Myntra, Ola and TaxiForSure will continue to function as independent entities. But unlike Myntra co-founder Mukesh Bansal, who has risen the ranks in Flipkart to oversee its day-to-day function, TaxiForSure co-founders Aprameya Radhakrishna and Raghunandan G will exit the company after ensuring a smooth transition. They will contribute in an advisory role for a certain period while present chief operating officer Arvind Singhal will take charge as the CEO of TaxiForSure. Besides, the entire senior leadership and 1,700-odd employees of TaxiForSure will be retained.
Also, none of the investors in TaxiForSure will exit the company and will roll over their stock into Ola, unlike the Flipkart-Myntra deal, where IDG Ventures, an early stage investor in Myntra, exited. According to sources, a majority of the payout will come in stocks, with the TaxiForSure co-founders and investors receiving between $60-80 million in cash. The sources also added that the investors in both Ola and TaxiForSure found more value in forging an alliance to stave off global major Uber, the reason why TaxiForSure declined an Uber takeover offer.
“Ola and TaxiForSure share the same vision of revolutionising urban mobility. TaxiForSure has a great team and they have built a very exciting business in a short time. There’s a lot of complementary value in the strategy TaxiForSure has followed. I look forward to working with them towards realising our common vision,” said Bhavish Agarwal, CEO, Ola.
“Ola and TaxiForSure have different approaches in the supply side. The former works on an operator-led model while Ola works with driver entrepreneurs. On the customer side, TaxiForSure has been focusing on the economy segment. There is a great complementary value in it and that is why we are keeping them as two separate brands. We get on board a large operator network and a large base of economy customers,” Anand Subramanian, director, marketing communications, Ola, told FE.
TaxiForSure has been losing ground, especially after Ola raised $210 million from Japan’s SoftBank last October at a pre-money valuation of $660 million. In comparison, TaxiForSure put up a pale show, raising about $50 million from Accel Partners, Helion Venture Partners and Bessemer Venture Partners, including a bridge round of $6 million early January at a valuation of $125 million. Its last fund raising, a $30-million round, came in August last year. In comparison, Ola has so far raised $277 million from SoftBank, Tiger Global Management and Matrix Partners.
Companies like Ola, TaxiForSure, Savaari, Bookmycab and Zoomcar have so far raised $350-370 million together.
Industry observers peg the domestic radio taxi market at $6-9 billion, even as the organised segment is likely to comprise only 4-5% of the overall market.