Companies

A very bumpy ride ahead for Ola

Sangeetha Chengappa Bengaluru | Updated on October 08, 2020 Published on October 08, 2020

How can the ride-hailing company navigate past multiple Covid roadblocks?

Ola Cabs could be staring at a difficult road ahead with it being denied the licence to operate in London and its core business taking a hard knock because of the Covid-19 pandemic.

With full recovery nowhere near the horizon, the Indian mobility industry, which is dominated by Ola and Uber, was at a 20-25 per cent recovery as of August, compared with pre-Covid levels, and is expected to see 60-70 per cent recovery by March/April 2021, as per industry estimates.

“In January, the industry saw 3.3 million rides per day including cabs, two-wheelers and autos. As of August, recovery of rides stood at 20-25 per cent of the daily rides. Cabs are at the lower end of this recovery at 18 per cent, two-wheelers at 25-27 per cent, and autos — which saw the highest recovery — stood at 30 per cent,” said Ujjwal Chaudhry, Associate Partner at RedSeer Consulting.

With its core cab-hailing business flailing, its popular shared ride service Ola Share decimated, multiple top management exits over the past few months, and its nascent ancillary revenue streams such as Ola Foods, Ola Financial Services and Ola Electric facing stiff competition, what is the next natural course of action for Ola?

Back to drawing board

“The mobility industry is showing no signs of recovery and the future looks uncertain and depressed. Ola will have to get back to the drawing board to structurally change and recalibrate its existing business model to come up with newer revenue models, accepting the fact that the earlier hockey stick growth does not exist any more,” said K Ganesh, serial entrepreneur, and Partner, GrowthStory.

Pointing out that solo mobility solutions is the way forward for Ola, given that the Covid situation is not likely to stabilise till 2022, Rajeev Banduni, co-founder and CEO, GrowthEnabler Global, said: “A vast majority of the population will be chary of getting into public transport like bus, train or metro, and will opt for solo rides on e-bicycles, e-bikes and petrol scooters, shunning shared rides such as Ola Share and UberPool. I haven’t hailed an Uber or Ola cab in the last seven months.”

Asked about the company’s alternate revenue streams, Anand Subramanian, Ola spokesperson, said: “Besides our ride-hailing business, we hold strong position in other businesses including Ola Foods, Ola Financial Services and Ola Electric. Our food business has 50 cloud kitchens in India and we aim to build a portfolio of 6-8 brands across a network of 200 kitchens by the end of 2021. Simultaneously, we are focussing a lot of our business around having a much larger share of electric vehicles. Our recent acquisition of Etergo BV marked our entry into the premium electric two-wheeler market both globally and nationally.”

Slow recovery

To further compound matters, the overall slowdown in the funding environment could see Ola manoeuvring some steep speed breakers on its road to raising funding from existing investors or fresh funding from external investors to extend its runway for another 12-18 months, until the business environment is back on track.

“Recovery is unlikely to cross 60-70 per cent in the next 12 months. While Ola may raise bridge funding from existing investors to tide over the current crisis, having Chinese investors on its cap table will make it difficult for it to raise funds from fresh non-Chinese investors, because of the Centre’s recent stand on Chinese investments,” said K Vaitheeswaran, co-founder AGAIN Drinks, and e-commerce pioneer.

Last valued at $6.3 billion when it raised $5.1 million from a Seoul-based fund — ARK Ola Pre-IPO Private Investment Trust — in September 2019, Ola has raised a total of $3.8 billion in funding in over 25 rounds from 44 investors to date, as per Crunchbase data. In March 2019, Ola had raised $300 million from Hyundai Motor Group and Kia Motors Corporation.

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Published on October 08, 2020
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