India could feel the effects of the Uber-Didi deal

| Updated on: Jan 17, 2018


Flush with fresh capital, Uber can take over Ola, which has been struggling to raise funds

The after-effects of Didi Chuxing buying Uber’s operations in China may be a precursor for more consolidation in the taxi-hailing industry with significant implications for the segment in India.

This would be true especially if Uber India’s arch rival Ola is unable to raise some much-needed funds in time.

The Bengaluru-based taxi app has SoftBank and Didi as investors. Global investment firm Tiger Global is also a common investor in both Uber and Didi.

Level playing field Vikram Gupta, founder of VC firm IvyCap, said he doesn’t see any near- or medium-term impact of the Uber-Didi merger in the Indian market. “The Chinese market is very different from that of India. There (China), the government regulates everything, whereas in India, there is a level playing field for everybody. We don’t have the BAT (Baidu, Alibaba, Tencent) kind of monopoly here,” Gupta said, adding that in India, the company which provides better customer experience and service will be the winner.

Giving the example of Amazon’s business in China, Apoorv Ranjan Sharma of Venture Catalyst said the e-commerce giant — even after half a decade of presence — has been able to garner a mere 1.5 per cent market share there. Whereas within three years in India, it has already taken over local rivals such as Flipkart and Snapdeal in terms of traffic.

Uber in China also faced the same fate. Though it pumped in over a billion dollars in that market, it was way behind Didi; however, in India, it has a equal market share with rival Ola.

Experts say the reverse might happen in the $12-billion taxi market in India. Flush with fresh capital and with just one big market to focus, which is India, the San Francisco-based taxi app might take over Ola, which has been struggling to raise capital over that last one year. Uber had recently raised $3.5 billion from investors in Saudi Arabia. Most of it was supposed to go into its Chinese operations. Now, it can direct these funds to its Indian operations.

Experts also feel that the Uber-Didi deal could be an understanding between the two companies and its common investors Softbank and Tiger Global, to take control of the Indian and Chinese market. With Didi taking claim of the Chinese market, Uber could reign the Indian market.

With the government in India trying to regulate the fares of the taxi-aggregators, a merger between Uber and Ola is also not completely inevitable.

Funding crunch Ola urgently needs more cash as can be seen from the huge spend it incurs on its operations. According to industry sources, Ola’s cash burn on a monthly basis is as high as $40 million while that of Uber is $30 million.

According to industry sources, Ola has a larger market share than Uber. However, Uber has access to more funds. 

However, Didi is sitting on fresh funding of $7.5 billion and can choose to use that to increase its stake in Ola.

“It is actually an intriguing situation developing in both the countries,” DriveU co-founder and CEO Rahm Shastri told BusinessLine . Shastri was one of the early investors in TaxiForSure which was eventually sold to Ola.  

“Uber is in a far better position than they were in China. It would want to use this situation to its advantage in India,” Shastri pointed out.

The only other player of significance in the sector is Meru Cabs. It owns about 6,000 taxis and another 14,000 from a third party. It has about 30,000 drivers. It recently received $25 million from Brand Capital and $80 million from India Value Fund. “We could see a situation where there will be one large player left in the field, which is not very conducive for the sector,” said Meru Cabs CEO Siddhartha Pahwa.

Published on August 01, 2016
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