Ola in talks with Temasek to add up to $1 billion to war chest

India’s largest ride-hailing application Ola is in talks with Singapore’s sovereign wealth fund Temasek and other investors to add $500 million-$1 billion to its war chest, according to people familiar with the development.
 
The deal, expected to value Ola at $6-7 billion, would include a secondary sale of shares by a slew of investors, said people familiar with the development. It would mark the first major liquidity event for the 8-year-old company that has been shoring up cash to battle its US-based rival Uber.
 
The selling shareholders include angel investor Rehan Yar Khan and the investors who got stocks in Ola after its acquisition of Taxiforsure in 2015, said the people aware of the matter.
 
These investors include venture firms Accel India, Bessemer Venture Partners, Helion Venture Partners and the Taxiforsure founders Aprameya Radhakrishna and Raghunandan G. These firms have mandated a local investment bank and the secondary block is pegged at $150 million for a stake of more than 5%.
 
Negotiations for the secondary transaction are being held in parallel with the talks for the primary stake, and both the deals are likely to be done together so the incoming investor would gain a sizable stake in the company, the sources said.
 
Spokespersons for both Ola and Temasek said that they “do not comment on market speculation.” Ola was last valued at $4 billion when it raised $400 million from Chinese internet conglomerate Tencent in September. While sources close to Ola say it has a 65-70% market share, Uber insists it has closed the market gap in terms of cab rides.
 
An investment by Temasek, which is also an investor in Uber’s Southeast Asia rival Grab, could help Ola turn up pressure on Uber, which has to cut losses before an initial public offering of its shares next year.
 
Japanese internet giant Soft-Bank, Ola’s largest backer since 2014, recently also became the largest shareholder in Uber, sparking speculation of a merger or acquisition of the US company’s Indian operations with Ola. One round of discussions took place between the two companies but the talks did not progress, although it is possible that a fresh round might take place in June, said a person familiar with the developments.
Uber strategy
 
On a recent visit to India, Uber’s new CEO Dara Khosrowshahi said the company sees India “as a core market” and will continue investing aggressively here. “I don’t want to categorically state or characterise any discussions that we may or may not be having. What I will categorically state — I consider India a core market and we are going to be investing in India and growing here for a long time,” he told ET when asked about a potential merger with Ola.
 
A spokesperson for Uber declined to comment on the matter. Uber’s global loss jumped 61% to $4.5 billion in 2017, with aggressive investments in India and Southeast Asia being one of the main reasons. A CNBC report in the US last month said Uber was in the process of selling its Southeast Asia business to Grab, which is also backed by SoftBank, for a stake in the Indonesian company.
 
Ola recently began operations in Australia, where Uber dominates, with much lower commission rates of 7.5% for drivers as compared to 20% charged there by Uber. Both Uber and Ola cut their operating losses or cash burn rates in 2017 as they pared driver and customer incentives.
 
Gross booking value of companies in the local ride-sharing space increased to $2.1 billion in 2017 from $1.5 billion in the year before, show data from consulting firm Redseer. About 85% of the market is in the cab-booking space but other segments have started to grow. The share of auto-rickshaws in this market doubled to 4% in 2017, while the share of pooled rides increased to 11% from 7%.
Shoot

Trending News

Why Amazon’s Flipkart bid is just not high enough

Selling without MRP, expiry dates to cost etailers

TCS hits $100Bn market cap: A new phase for India Inc?

Snapdeal posts Rs 4,647 crore net loss in 2016-17

Flipkart-Walmart deal: What it means for the etailer and the whole industry

NCLAT stays CCI penalty of Rs 136cr on Google in search bias case

Walmart may rope in Google parent Alphabet for the Flipkart deal

Internet shutdown cost Indian economy $3 billion from 2012-17: Study

Flipkart and Amazon plan mega summer sales in May

International sales now account for 48% of Twitter's revenues

70% of mobile phones buyers in India opt for non-cash payments

Amazon India expects groceries & household products to account for 50% of business in 5 yrs

India to come out with a E-commerce policy framework in 6 months

Online learning platform Career Anna raises Rs 3 Cr funding

Wal-Mart will offer to buy up to 86% of Flipkart

Agritech startups Sabziwala and LivLush merge their business under new entity Kamatan

Avail Finance lands $17.2M from Matrix Partners & Ola, Freecharge and Flipkart founders

RBI suggests tax sops, self-regulation to build fintech space

Swiggy hires new CEO for its Access Service, gets new CFO

Logistics company Delhivery registers 44% increase in FY17 revenues

WeWork to acquire one of the oldest social networks, Meetup

Qualcomm rejects Broadcom's $103 billion offer

EasyRewardz gets $2 million Series-A funding

'Anemic' iPhone 8 demand drags Apple shares lower

Lending platform Lenden Club gets Rs 3.5cr in Equity Investment

On festive sales, Flipkart says 65% clients from Tier-II cities