Ola cab is in top gear! It’s the third-most valuable venture-backed company in India

Ola’s growth in India has been massive, skyrocketing and exemplary for many startups. Taxi app Ola has become the third-most valuable venture-backed company in India after snagging funding of $400 million, or Rs 2,500 crore, from a consortium of investors. From being a basic taxi hailing app to becoming third-most valuable venture-backed company in India, Ola’s growth trajectory involves many fold of an untold story.

As per a news report by The Economic Times, valued at $2.4 billion (Rs 15,600 crore), the Bengaluru-based company said it will use the money to expand to new locations and diversify into new business areas as it looks to consolidate its lead in the cab-aggregation markafter buying rival TaxiForSure last month. "We will scale up rapidly and double our products and engineering team to about 1,000 in the next quarter," Bhavish Aggarwal, an IIT-Bombay alumnus who claimed the merged entity now commands an 80% share of the market told the financial daily.

Only online marketplaces Flipkart and Snapdeal are valued above Ola, but the company is competing against Uber, one of the most exciting startups in world. Although it is much smaller than Ola in India, Uber-it is the second-most valuable startup in the world at $41 billion after Chinese handset maker Xiaomi-has deep pockets and has expressed its commitment to stay the course in India.

Russian billionaire Yuri Milner's DST Global, Singapore's state investment arm GIC and New York-based hedge fund Falcon Edge Capital were joined by Ola's existing investors in the latest funding round. The company last raised capital in October 2014 when it received $210 million, led by Japan's SoftBank when it bagged a valuation of about $650 million.

"Our growth has been strong and we have a very strong market leadership position, which are key reasons for our investors being so supportive," said Aggarwal, 29, who teamed up with collegemate Ankit Bhati to launch the firm in 2011.

At the end of March, Aggarwal owned 12% in ANI Technologies, the parent company of Ola, and Bhati 5%, according to investor documents accessed by ET.

For Uber, India will be crucial because it has a minuscule share of the Chinese taxi app market dominated by the combine of Didi Dache-Kuaidi Dache, which is valued at $8.75 billion and counts Alibaba and Soft-Bank as investors.

For cab-hailing apps in India, the biggest concerns don't relate to the market-industry estimates peg it at around Rs 60,000 crore, of which only 4-6 % is organised--but the regulatory environment. Officially, Ola and Uber are both banned in Delhi and the government is yet to come up with rules that will govern their services.

A statement on Thursday said it will use the latest round of funding to expand cab aggregation services in about 200 smaller towns and cities. About one-fourth of the capital will be used to grow business at TaxiForSure. Ola has also been experimenting with logistics services and has introduced delivery of meals from restaurants on its app last month. Analysts are of the view that while the valuation bagged by Ola is supported by business plans, it is also influenced by overwhelming sentiment in favour of consumer internet ventures worldwide. "Half is the business plan and the valuation attached to that, and the remaining 50% is all about the sentiment of ecommerce ventures," Jeenendra Bhandari, partner of accounting firm MGB & Co. LLP told the ET. It's not only the bigger internet companies that are attracting a high price. Even at the seed and first round venture funding, investors are valuing companies at four times the investment amount.

(Image : Reuters)