Competition is set to get tougher in the Indian cab aggregator space. Homegrown cab aggregator Ola has secured $2 billion in a fresh round of funding from investors such as SoftBank Group and Tencent Holdings, reports Bloomberg.
The other investors participating in the funding round include Ratan Tata’s venture capital fund arm run jointly with the University of California’s investment arm, as well as several US institutional investors.
While the information on valuation of the company post this financing round isn’t immediately available, this fresh ammunition will help Ola up its game against its biggest rival Uber.
As per the Bloomberg report, the deal will help Ola build its supply of vehicles and drivers and also build strategic technology to improve its competitive edge against rival Uber. Bloomberg also quotes sources as saying that the funding round isn’t finished yet and the amount could change.
This is SoftBank’s second largest funding in India after its SoftBank Vision Fund pumped in $4 billion into ecommerce major Flipkart, which competes with global ecommerce major Amazon. Chinese conglomerate Tencent too, participated in that financing round.
According to an Economic Times report, Tencent has finalised an investment of $400 million Ola, valuing the startup at over $3.8 billion.
The entry of Tencent will help Ola counter the influence of its largest shareholder SoftBank, reports ET.
Earlier this year, Ola amended its Articles of Association (AoA) to avoid any kind of a hostile takeover by its largest shareholder SoftBank. As per the amendment, SoftBank would need to seek approval of Ola’s founders Bhavish Aggarwal and Ankit Bhati, besides the board, to increase its stake through either primary or secondary share purchases.
Since the beginning of this year, Ola has so far raised $150 million from RNT Capital Advisors, US hedge fund Falcon Edge, and New York-based hedge fund Tekne Capital Management. Prior to that, it raised $250 million from SoftBank in November 2016.
Ola’s previous investors include Tiger Global Management, DST Global, Accel and Sequoia Capital.
The $10-billion cab aggregator market in India has been seeing tough competition with Ola and Uber being the clear leaders. While Ola continues to be the market leader with a little over 50% of market share, Uber has been increasing the pressure and has even begun a large-scale marketing campaign in India, which is one of its largest markets outside of the US.
Reports also suggest that SoftBank is also considering a multi-billion dollar investment in Uber. If this does go through, it could change the landscape of the cab aggregator market in India and may even prompt consolidation.