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Despite hefty losses, SoftBank still backs Ola

May 02, 2017 14:03 IST

Industry watchers say while it’s completely possible for a firm like SoftBank to step in and take control of Ola, it’s usually one of the least favoured options.

India’s largest taxi service aggregator, Ola, reported a threefold increase in losses to Rs 2,313.6 crore (Rs 23.17 billion0 for the year ended March 31, 2017, but its largest investor, SoftBank, continued to retain confidence with the company.

Unlike with Snapdeal, the Japanese investment firm’s biggest bet in India that it is desperately trying to sell, SoftBank’s demands from Ola are more on the lines of pulling up its socks, sources said.

SoftBank penalised Ola in its latest round where it invested $250 million at a $3.5-billion valuation, down from $5 billion at which the company had raised its last round. Moreover, Ola has already begun to position itself from fast-paced growth to growth with profits in its sight.

“We have significantly improved our bottom line over the past year or so, and we have a very clear path to profitability. Within the next two years, we will be profitable,” said Bhavish Aggarwal, co-founder and chief executive, at a TiE event in Delhi last month.

Ola has drastically scaled back incentives it had paid to drivers to keep them from being poached by rival Uber, which has done the same. Issues of fares, too, have crept up on both platforms in the past six to eight months.

While Ola burned money to fend off an attack from Uber, the US ride-hailing giant felt the pinch, too.

Estimates suggested Uber spent between $600 and $800 million in 2016, which helped it get to 45-per cent market share in the Indian taxi aggregator market, with Ola still maintaining the lead.

Industry watchers say while it’s completely possible for a firm like SoftBank to step in and take control of Ola, it’s usually one of the least favoured options.

Photograph: Shailesh Andrade/Reuters

Alnoor Peermohamed in Bengaluru
Source: source image