Singapore's Temasek buys stake in Ola for $225 million

Homegrown ride-hailing company Ola seems to be playing all the right cards as far as growth is concerned. After establishing itself as a frontrunner in India, Ola has been on an expansion mode, launching its cab service in Australia as well as the UK. Hot on the heels of this expansion is Singapore-based Temasek's purchasing of a single-digit stake in Ola for $225 million. This is considered a major step in Ola's larger plan to raise $1 billion in wake of its expansion strategy.

A report published in the Economic Times said the stake was bought from a group of early investors in the company though Temsek is also in discussion with Ola's management to pump in more funds into the company by way of subscription to new shares.

Temasek is a global investment company, whose portfolio spans a broad spectrum of industries, including financial services, telecommunications, media and technology, consumer and real estate, transportation and industrials, etc. Having such a strong investor on board will give Ola an edge to raise more funds in future, say experts. In this round of investment, some early employees of Ola, including Rehan Yar Khan and VC investors like Accel India, Bessemer Venture Partners, Texiforsure founders Aprameya Radhakrishna and Raghunandan G, etc, will sell some of their shares in Ola.

On August 7, Ola had announced the company's expansion to the UK where it will not only offer passengers the option to book private hire vehicles (PHVs), but also black cabs. The company is also planning to add other modes of transport on the same platform in the future.

The company started its first overseas expansion in Perth, Australia, in a hope to counter ride-hailing giant, Uber. Like other top start-up companies like Zomato and Paytm, Ola is also aiming to expand overseas where it has a chance to make more money, though high customer expectations remain a challenge.

In July, Ola said it had started making profit after facing losses for the past two years. In financial year 2016-17, Ola reported losses of over Rs 4,897 crore, as per documents filed with Registrar of Companies (RoC). In 2017-18, it reported losses to the tune of Rs 2,313 crore. However, the battle is far from over. The company has projected a net operating loss of Rs 1,235 crore for FY19, according to its latest valuation report filed with MCA for the stock acquisition of public transport ticketing app, Ridlr.

According to the company's filings with the ministry of corporate affairs, although Ola curtailed variable costs such as advertising and promotion expenses by 53 per cent to Rs 285 crore in FY17, against Rs 438 crore in the previous fiscal, its fixed costs such as salary expenses increased to Rs 572 crore from Rs 461 crore.

(Edited by Manoj Sharma)