Ace stock market investor Rakesh Jhunjhunwala who has been critical of the business model of the cab-hailing companies including Ola and Uber in the past has once again questioned the long term success of the cash-burning model.
Ace stock market investor Rakesh Jhunjhunwala who has been critical of the business model of the cab-hailing companies including Ola and Uber in the past has once again questioned the long term success of the cash-burning model. “I am very bearish on Uber, Ola, Lyft because of their ability to lose money, not make money. If they are all linear models so when are they going to make money,” Rakesh Jhunjhunwala told CNBC-TV18 in an interview.
Uber, for instance, posted its biggest-ever quarterly loss — $5.24bn ending June 2019 along with slowest-ever revenue growth in the same quarter that led to its shares slide 10 per cent, Wired reported last week. Ola’s losses for FY18 was cut by more than 50 per cent to Rs 2,842 crore from Rs 4,897 crore in FY17 while its revenue went up 61 per cent to Rs 2,222 crore in FY18, PTI had reported. Including cab booking companies, the entire e-commerce model of discount-led growth to acquire users and boost top-line has always remained in question.
“I don’t think technology is easily going to dislocate or disrupt a lot of sectors,” said Jhunjhunwala adding “up to when can I keep marketing, that I am going to have taxis in the sky and automatic cars. What about my bottom line?”
Rakesh Jhunjhunwala pointed towards the IPO of some of the large internet companies that didn’t turn out as expected. “The ultimate valuer of all these companies is going to be public issues and the last two-three issues of these so-called unicorns in the US have not been very good,” he said. Uber, Snap, Lyft were among the top internet companies that got listed in the past few months but failed to deliver as per the investor’s expectations.
Last year, Rakesh Jhunjhunwala had said that he doesn’t understand their business model and that doesn’t believe in the valuation of Uber because he doesn’t understand its economic model. “When I keep incurring a loss of $15 billion or $10 billion a year, that means I am subsidising my customer. I will know my true consumer when I charge the true price,” Rakesh Jhunjhunwala said at the Global Business Summit. “I do not invest in startups. When Flipkart was available seven years-eight years ago, I did not understand these companies.”