Economy

Ola, Uber on road to merger

K. Giriprakash Bengaluru | Updated on March 29, 2018 Published on March 28, 2018

Top shareholder Softbank looking at consolidation to cut costs

Will Uber and Ola merge?

Japanese conglomerate SoftBank, which is consolidating its investments in cab-hailing services across the globe, is said to be brokering a deal for the merger of Ola and Uber in India, in which it holds controlling stakes.

SoftBank Vision Fund owns about 26 per cent stake in Ola, while its stake in Uber is slightly lesser. Softbank recently invested $2 billion in Ola, while it has pumped in about $1 billion in Uber.

Earlier this week, Uber agreed to sell its South-East Asian operations to Grab two years after it sold its Chinese operations to Didi Chuxing, where again the common investor was Softbank.

Sources in both the companies said that the move behind the consolidation is spurred by increasing competition among Softbank-backed cab aggregators, which is draining its resources.

 

 

In India, Ola has made major gains as far as market share is concerned and it recently bought food aggregator Foodpanda to take on UberEats, which is gaining traction in the country. Elsewhere, too, Uber has been pouring in money to take on rivals, which is worrying Masayoshi Son’s Softbank Group Corp. Uber, Grab, Ola and China’s Didi Chuxing provide about 45 million rides a day. In India, Ola has 900,000 cabs under its operations, while Uber has about 350,000.

According to various estimates, Ola has 56-70 per cent market share in India. The ride-hailing market in India is worth about $15 billion.

While Ola has not denied reports about the merger talks, Ubersays it will focus on organic growth. “In India’s transformative digital journey, Ola will always be an active and integral part for decades to come. Softbank and all other investors are committed in realising this ambition,” an Ola spokesperson said.

In a statement, Dara Khosrowshahi, CEO, Uber, said: “We’d, of course, look at any deals that can add value to our partners and shareholders, but we believe in controlling our own destiny in India.”

Rahm Shastry, one of the earliest investors in taxiforsure, which was eventually bought by Ola, said given that SoftBank is the largest investor in Ola as well, it simply doesn’t make sense for the two to endlessly fight for market-share and lose money over customer discounts and driver incentives.

“The benefits of this merger now decidedly tilt in favour of drivers over consumers. Up until now, the consumers benefited greatly with discounted rides. Now, with competition out of the way, cab fares will rise and drivers will benefit.”

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Published on March 28, 2018
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