Indian ride-hailing firm Ola raises US$2bn from investors led by SoftBank, Tencent

Deal will help the start-up build up vehicles and drivers to compete against Uber in India’s US$10bn ride-hailing market

PUBLISHED : Tuesday, 03 October, 2017, 4:35pm
UPDATED : Tuesday, 03 October, 2017, 10:56pm

A group of investors led by Japanese conglomerate SoftBank Group Corp and Chinese internet giant Tencent Holdings has invested US$2 billion in the latest round of funding for ride-hailing services provider Ola, the fiercest rival of Uber Technologies in India, according to a person familiar with the matter.

Other backers in the ride-hailing start-up’s latest financing initiative included a venture capital fund jointly run by Indian industrialist Ratan Tata and the University of California’s investment arm, as well as several US institutional investors, people familiar with the deal said.

Ola’s valuation after the financing was not immediately clear.

The deal will help Ola shore up its lead in India and build its supply of vehicles and drivers, as well as technology to help it win against Uber. The funding round is not finished yet and the amount could change, the person added.

Uber and Ola, whose parent is ANI Technologies, are competing in one of the world’s most attractive ride-hailing arenas.

Ola currently holds the upper hand in the US$10 billion Indian market, but Uber has been increasing the pressure through driver incentives and promotions targeted at its rival’s existing markets.

San Francisco-based Uber is ratcheting up spending in emerging markets after ceding mainland China to rival Didi Chuxing, though boardroom squabbles and a London ban now threaten to sidetrack the company’s management.

Uber, Ola in race to dominate India’s booming taxi market

The new funding will allow Ola to try and fix driver shortages in the lower-tier cities across India.

That in turn may prompt arch-foe Uber to respond, shifting the battle toward resolving fundamental issues rather than a discounting war, said Anil Kumar, the chief executive at Bangalore-based RedSeer Consulting.

“The cash coming into Ola’s bank is going to affect the competitive strategies of both Ola and Uber, and both will be able to move from short-term price war games to a long-term sustainable business model,” Kumar said.

Fixing vehicle shortages also builds Ola’s business outside major metropolitan areas.

“Ola has been growing in the top seven or eight cities, but are in over a 100 cities and a lot more needs to be done,” Kumar said. “SoftBank will want the market to grow both in size and momentum, so Ola will need to rev up in other cities.”

Ola has received other financing, but the latest cash influx marks the second-largest funding round in an Indian start-up, after Flipkart Online Services, the country’s largest online retailer.

The SoftBank Vision Fund and Tencent also invested a total of about US$4 billion in Flipkart this year, as the Indian online retail services provider competes with Amazon.

The Ola round, which is nearing completion, already has participation from one of SoftBank’s investment arms, Simi Holdings. It was not immediately clear if SoftBank’s US$93 billion Vision Fund would participate.

SoftBank is also considering a multibillion-dollar investment in Uber.

Ola’s previous investors include Tiger Global Management, DST Global, Accel and Sequoia Capital.