After Uber’s Southeast Asia ‘Grab’, Ola reportedly keen to acquire it in India, with Softbank’s backing

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Updated: March 28, 2018 11:07:50 PM

The gist is that Japanese investor Softbank, which incidentally is an influential stakeholder in both the cab aggregators, wants Uber and Ola to merge in India. As for Ola itself, the company is reportedly keen on acquiring Uber in India, rather than merging with it.

After Uber’s Southeast Asia ‘Grab’, Ola reportedly keen to acquire it in India, with Softbank backing itCo-Founder and CEO of Ola Cabs Bhavish Aggawal

Just days after Uber’s Southeast Asia operations were merged with the homegrown rival Grab in eight countries, news reports of the cab aggregator being in talks with its India rival Ola for a merger have gained momentum. While Uber seems to be denying the reports vehemently, Ola, on the other hand, seems to be pushing the idea forward.

The gist is that Japanese investor Softbank, which incidentally is an influential stakeholder in both the cab aggregators, wants Uber and Ola to merge in India. As for Ola itself, the company is reportedly keen on acquiring Uber in India, rather than merging with it.

An Ola spokesperson did not confirm or deny the reports of talks with Uber for a possible merger. “In India’s transformative digital journey, Ola will always be an active and integral part for decades to come. SoftBank and all other investors are committed in realizing this ambition. Ola is always actively looking for opportunities for expansion of its footprint,” the Ola spokesperson said in a statement to FE Online.

In a statement to FEOnline, Dara Khosrowshahi, CEO of Uber said, “We are focused on driving growth and any company has to build out its capabilities both in terms of organic and transaction-driven growth. That said, we will be more focused on organic growth in the markets that we are operating in. We want to be the top mobility platform for customers around the world, and that means building out the very best in the product, technology, and service. The great news about our Grab deal is that it allows us to double down to invest aggressively in our core markets—and we consider India very much as core to Uber’s success. We’d, of course, look at any deals that can add value to our partners and shareholders, but we believe in controlling our own destiny in India.”

“We have no intention of doing any more deals where we do not remain as the controlling shareholder of the combined company. We have strong positions in our core markets,” said a source familiar with the Uber-Ola deal.

A person at Ola aware of the development said that calls for Uber to go for an IPO in the US are growing louder. To make a potential IPO attractive for the investors, Uber would need to cut down on its loss making operations, such as that in India. Even as Uber’s new CEO Dara Khosrowshahi has denied any plans to exit India, investors are pressuring the cab hailing giants on cutting down losses.

This will not be the first, but might be the most painful experience for Uber, losing a huge market like India. They’ve been acquired by local players in Russia (Yandex), China (Didi), and Southeast Asia (Grab). Recent reports have suggested that Uber has gradually yielded the market share in India (now at less than 40%) in the last six months to Ola, which reportedly controls over 56%.

Earlier this year, Ola began operations in Australia. Unsurprisingly, Uber was the first to launch its services in Australia across 20 cities and New Zealand. Uber’s Europe competitor, Taxify — which is backed by Didi (like Ola), also began its operations in Australia. Both companies have expanded since then. Ola claimed to have registered over 7,000 drivers in the first 15 days or so. Ola had also raised $1 billion from Singapore venture firm Temasek in its last round in November last year.

Since the time Ola raised money from Softbank, Uber was thought to be contemplating exiting unprofitable markets, such as India, to ramp up its finances before an IPO. But these rumours were denied by the CEO Dara Khosrowshahi, who clearly stated that the company is planning to spend aggressively in India.

Recently, both Ola and Uber were involved in a ugly spat with drivers who went on a strike to protest a drop in earnings. Maharashtra’s local party MNS’ transport wing called for a shutdown in Mumbai. The man leading the protest, Sanjay Naik, stated that the cab hailing companies had promised drivers earnings of Rs 1.25 lakh each month, which was not being done. Rather, drivers reported earning as less as Rs 25,000-30,000 a month.

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