Clinching two big, back-to-back rounds of funding is surely manna from heaven for any start-up on a fast growth track. But, this may not be enough to bail out India’s largest cab-hailing app Ola from supply-led challenges, that is set to slow down its growth momentum.

The cab aggregator market which grew at a fast clip of 50 per cent two years ago has witnessed a slowdown in growth over the last six months due to supply-led challenges, as cab drivers across the country took to the streets to demand better earnings, making it difficult for cab aggregators to retain existing drivers and onboard new ones.

Eye on profits

This is because, in its move towards profitable growth with an aim to go public in the next three years, Ola has sought to increase its earnings by almost doubling ride fares while simultaneously cutting down on driver incentives over the last 24-36 months, resulting in a 40-50 per cent drop in driver earnings.

“From registering 20-25 per cent growth last year, the cab aggregator market has dropped to 10-15 per cent growth in the last six months. This is because cab aggregators are finding it very difficult to recruit and retain driver partners although demand continues to be robust,” said Anil Kumar, founder CEO of RedSeer Consulting.

Ola has been stepping up efforts to skill potential driver partners by signing MoUs with multiple State governments, including Maharashtra, Haryana and Madhya Pradesh, which began with the launch of its first dedicated training centre for drivers in partnership with Rise India and National Skill Development Council in Bihar in 2016. This initiative is expected to add 50 lakh drivers to its platform by 2022.

“No amount of funding will help Ola win customers or hit profitability as long as there is no product or service differentiation that can compete with Uber, which has a better product, stronger brand, superior service levels and a lot more money,” said K Vaitheeswaran, founder of India’s first e-commerce company and author of ‘Failing to Succeed.’

If Ola has not reached profitability despite having a far wider reach across 125 cities compared to Uber’s 33 cities, imagine what will happen when Uber expands and matches Ola’s reach, he said.

Diversification

Ola’s attempts to diversify outside of its core business and to foray into international markets is being seen by analysts as a way for it to increase its valuation before it goes in for an IPO by increasing its customer wallet share. Ola has accelerated its push in international markets with its first international market launch in Australia in January last year followed by launches in the UK and New Zealand.

In December 2017, the unicorn start-up diversified into the food delivery business with the acquisition of Foodpanda, which is struggling to compete with Swiggy, Zomato and Uber Eats despite having pumped in $200 million into the business.

Last week, Ola announced the rollout of Ola Money Postpaid, a digital credit payment offering a 15-day credit line to its 150 million customers.

Gojek model

Ola plans to integrate it into other segments such as food, entertainment and utilities in the coming months, where customers can pay for multiple products and services. “Ola could be looking to build a Gojek app-like model, which started off as a public transportation app and now offer 18 products and services, including payments, logistics, laundry, massage, makeup, grocery and medicine delivery etc, making it convenient for customers to access all their needs on a single platform,” said an industry expert, adding that Gojek, first launched in Indonesia , had 120 million downloads and crossed 100 million transactions/per month last year.

Another option that Ola is exploring is acquiring an NBFC licence that will empower the company to offer car loans under its own books to driver partners, whose vehicles are being seized as they default on loans; and also offer loans and other credit services to its customers. It, however, remains to be seen whether its attempts to make a profit fructify.

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