Ola lays off 1,400 people, co-founder Bhavish Aggarwal explains the move in a letter to survive Covid

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Updated: May 20, 2020 2:50 PM

After Zomato, Swiggy, Uber, WeWork, Cure.fit etc. Ola on Wednesday announced laying offs employees to survive Covid-19 impact.

Ola will provide affected employees with a minimum financial payout of 3 months of their fixed salary. Image: Reuters

Top technology businesses have been hit hard by Covid and to reorient their survival strategy during the current pandemic, employee layoffs has been the key step taken by such businesses. After Zomato, Swiggy, Uber, WeWork, Cure.fit etc. Ola on Wednesday announced laying offs 1,400 employees. Company’s co-founder and CEO Bhavish Aggarwal in a note sent to employees on Wednesday said that “every affected employee will receive a minimum financial payout of 3 months of their fixed salary, irrespective of the notice period.” Ola had reportedly laid off 500 employees in December last year as well.

Admitting the longer-than-expected impact of Covid on services like cab booking, Aggarwal said, “the prognosis ahead for our business is very unclear and uncertain.” With businesses looking at having an increasing number of employees work from home along with air travel being limited to essential trips while vacations and leisure travel being put off for indefinite period ahead, the impact “is definitely going to be long-drawn for us.”

The impact is already evident on Ola. Aggarwal said the revenue has declined 95 per cent over the past two months even as the livelihood of Ola’s drivers and their families have been at stake. The company will provide insurance to laid-off employees apart from medical insurance for parents of all employees apart from placement support. “No more COVID related cuts will be done after this exercise,” assured Aggarwal.

“Shared mobility services like cabs may get pushed out for six-nine months post-Covid as consumers will be hesitant to book rides. The number of trips may get curtailed. So there will be a challenge for these firms. However, the value proposition of shared mobility is very strong and it will continue as a seminal trend,” Yugal Joshi, Vice President at Texas-based consultancy Everest Group had told Financial Express Online.

The lack of demand for cab-hailing apps like Ola and Uber due to hygiene concerns may also lead to a surge in sales of personal vehicles. An Ipsos report said that at least 40 per cent of purchase intenders are more likely to buy a new or a used car.

The development at Ola came two days after SoftBank reported a massive $17.7 billion loss for its first Vision Fund as the valuation for its top unicorns including Uber, WeWork plunged. The biggest backer of startups globally, SoftBank saw an operating loss of $13 billion for FY20. Softbank is also the biggest shareholder in Ola and reportedly owned around 25 per cent in the company till last year. Both Ola and Uber had announced resuming services to multiple cities with the beginning of lockdown 4.0. While Ola is now live in 160 cities including few red zone areas, Uber is back on the roads in 34 cities.

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