Ola raises $1.1 billion led by Tencent, in talks for another $1 billion
, ET Bureau|
Oct 11, 2017, 02.32 PM IST
BENGALURU: India's largest ride-hailing application Ola has closed a $1.1 billion round of financing, which has been in the works for a year, led by Chinese internet conglomerate Tencent.
The Bengaluru-based startup said that it is in "advanced talks with other investors to close an additional $1 billion as part of the current financing round" taking the total raise to over $2 billion.
The round will give Ola a post money valuation of over $4 billion. The company said in a statement that existing investor SoftBank besides "other new US-based financial investors" have participated in this round, without naming them. Sources close to Ola said that the company is looking to close the round by end of the year.
Softbank, which continues to remain a largest shareholder in Ola owning over a third of the company, is also in the process of picking up a large stake in its troubled global rival Uber. Entry of a large investor like Tencent is expected to counter the influence of Softbank in the company.
“Ola’s unique local offerings are tailored to India’s burgeoning transportation needs. The strategic partnership with Ola makes it possible for Tencent to be part of the fast-growing ride-hailing space in the country,” said Martin Lau, President of Tencent Holdings.
Read: Tencent invests $400 million in Ola for 9.57% stake
Ola will use the current round of financing to improve supply of drivers, which will be done through increased focus on the leasing business and increasing the number of drivers attached to this platform. Ola also plans deeper investments in technology, primarily in data sciences and electric vehicle infrastructure.
"We are thrilled to have Tencent Holdings join us as new partners in our mission to build mobility for a billion Indians. The transportation and mobility industries are seeing huge changes globally. Our ambition is to build a globally competitive and futuristic transportation system in India that will support and accelerate a nation on the move!,” said Bhavish Aggarwal, Co-Founder and CEO of Ola.
Ola got first commitments for the current round of funding in November 2016, when it closed a $250 million raise from SoftBank, after which it has kept the funding round open. After that it raised about $150 million in funding this year, from funds like Ratan Tata’s venture fund RNT Capital Advisors, US hedge fund Falcon Edge, and New York-based hedge fund Tekne Capital Management.
The funding momentum comes after Ola decided to raise capital at a lower valuation of $3 billion — down from $4.5-5 billion in 2015 from SoftBank in November 2016. The fundraising was the first down round — a term used to define fundraising at a lower valuation — for an Indian internet company valued over $1 billion in the current cycle.
According to analysts, Ola continues to be the market leader. Verticals like Ola’s auto rickshaw segment and outstation rides have begun to pay off. Uber, however, is not present in the auto segment in India but has been expanding its bike sharing service, UberMoto.
The increasing interest in Ola among investors comes at a time when rival Uber has been embroiled in a series of internal challenges, which have already led to changes in its top management, with former Expedia CEO Dara Khosrowshahi taking former Uber CEO Travis Kalanick’s place.
Uber also announced earlier this year that it was exiting direct operations in Russia, having sold its business there to local player Yandex for a stake in the combined entity. Last year, Uber sold its business in China to Didi Chuxing. This has raised questions about whether Uber, which is world’s most valued startup at $70 billion, will continue to aggressively spend on global markets.
The Bengaluru-based startup said that it is in "advanced talks with other investors to close an additional $1 billion as part of the current financing round" taking the total raise to over $2 billion.
The round will give Ola a post money valuation of over $4 billion. The company said in a statement that existing investor SoftBank besides "other new US-based financial investors" have participated in this round, without naming them. Sources close to Ola said that the company is looking to close the round by end of the year.
Softbank, which continues to remain a largest shareholder in Ola owning over a third of the company, is also in the process of picking up a large stake in its troubled global rival Uber. Entry of a large investor like Tencent is expected to counter the influence of Softbank in the company.
“Ola’s unique local offerings are tailored to India’s burgeoning transportation needs. The strategic partnership with Ola makes it possible for Tencent to be part of the fast-growing ride-hailing space in the country,” said Martin Lau, President of Tencent Holdings.
Read: Tencent invests $400 million in Ola for 9.57% stake
Ola will use the current round of financing to improve supply of drivers, which will be done through increased focus on the leasing business and increasing the number of drivers attached to this platform. Ola also plans deeper investments in technology, primarily in data sciences and electric vehicle infrastructure.
"We are thrilled to have Tencent Holdings join us as new partners in our mission to build mobility for a billion Indians. The transportation and mobility industries are seeing huge changes globally. Our ambition is to build a globally competitive and futuristic transportation system in India that will support and accelerate a nation on the move!,” said Bhavish Aggarwal, Co-Founder and CEO of Ola.
Ola got first commitments for the current round of funding in November 2016, when it closed a $250 million raise from SoftBank, after which it has kept the funding round open. After that it raised about $150 million in funding this year, from funds like Ratan Tata’s venture fund RNT Capital Advisors, US hedge fund Falcon Edge, and New York-based hedge fund Tekne Capital Management.
The funding momentum comes after Ola decided to raise capital at a lower valuation of $3 billion — down from $4.5-5 billion in 2015 from SoftBank in November 2016. The fundraising was the first down round — a term used to define fundraising at a lower valuation — for an Indian internet company valued over $1 billion in the current cycle.
According to analysts, Ola continues to be the market leader. Verticals like Ola’s auto rickshaw segment and outstation rides have begun to pay off. Uber, however, is not present in the auto segment in India but has been expanding its bike sharing service, UberMoto.
The increasing interest in Ola among investors comes at a time when rival Uber has been embroiled in a series of internal challenges, which have already led to changes in its top management, with former Expedia CEO Dara Khosrowshahi taking former Uber CEO Travis Kalanick’s place.
Uber also announced earlier this year that it was exiting direct operations in Russia, having sold its business there to local player Yandex for a stake in the combined entity. Last year, Uber sold its business in China to Didi Chuxing. This has raised questions about whether Uber, which is world’s most valued startup at $70 billion, will continue to aggressively spend on global markets.
