SoftBank Group invests in Ola again despite reporting loss: 4 things to know

By: | Updated: October 3, 2017 12:27 PM

India’s ride-hailing company Ola has secured $2 billion in new funding from a group of investors including SoftBank Group Corp despite causing valuation loss to the latter in for the financial year ending March 2017.

ola taxis, ola cabs, ola company, Karna Tourism Department, United Nations, World Tourism Day, ola tourism, industry newsIndia’s ride-hailing company Ola has secured billion in new funding from a group of investors including SoftBank Group Corp despite valuation loss. (Image: Reuters)

Japanese multinational telecommunications SoftBank Group Corp is among a group of investors that have invested $2 billion in India’s ride-hailing company Ola despite its loss on the company. According to reports, Ola secured $2 billion in new funding from SoftBank Group Corp, Chinese internet conglomerate Tencent and others on Monday.

The funding is also backed by a venture capital fund jointly run by Indian industrialist Ratan Tata, University of California’s investment arm and US institutional investors. The first round of investments have pegged the valuation of Ola at over $3.8 billion, The Economic Times reported.

However, the question here is why has Softbank Group funded the ride-hailing company despite reporting a loss on its investment in Ola? Here are four things you need to know:

  1. In October 2014, Softbank invested $210 million in Ola and $627 million in Snapdeal. The Japanese telecommunication made follow-on investment in both firms. It had then become the biggest investor of Ola.In March 2017, Softbank reported an annual loss of $1.4 billion from its investments in Ola, Snapdeal and others, following which it wrote off over $1 billion on the valuation of its investment in Snapdeal and pushed for a merger with Flipkart.
  2. In March 2017, Softbank reported an annual loss of $1.4 billion from its investments in Ola, Snapdeal and others, following which it wrote off over $1 billion on the valuation of its investment in Snapdeal and pushed for a merger with Flipkart.
  3. To save its interest Ola reportedly amended its Articles of Association (AoA) to make it mandatory for Softbank to seek approval of company’s founder Bhavish Aggarwal and Ankit Bhati, along with the board, to increase its stake through primary or secondary share purchases. Softbank holds over 40% stakes in Ola.
  4. Ola finalised $400-million from Chinese internet conglomerate Tencent, whose entry will help the company neutralise the influence of Softbank.

Both Ola and Softbank have declined to comment on the funding, and the reason behind Softbank investing in Ola again despite the losses is not clear yet.

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