Ola's Dilemma Over SoftBank's Offer
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According to recent reports, rumours are rife that Japanese investment Conglomerate is planning to invest $1 billion in India’s ride-hailing giant Ola. The funding amount can be used to meet expansion needs for its food delivery venture and some areas of e-pharmacy as well.
SoftBank had been in news in 2016 for offering a certain amount of funding to Ola which it had refused. It was also recently made headlines for appointing India’s investor, Sumer Juneja as Indian Head and now it is making waves again for its funding plan for Bhavish Aggarwal led online platform. However, Ola is expanding and trying to innovate and make new introductions in its ecosystem.
A Crucial Juncture for Ola
The report also emphasized that till now it is not clear if Aggarwal will accept this offer. Accepting this offer may mean that SoftBank’s stake will increase from its current 26 per cent, something that makes this offer ambivalent and ambiguous. Thus, even though SoftBank CEO Masayoshi Son and Aggarwal have met several times, the latter is not certain about accepting the offer that has been rolled out.
It is also important to take into note that Ola has an assured backing from Flipkart co-founder Sachin Bansal and existing backer Steadview Capital of about $200-250 million funding.
This is proving to be an increasingly difficult and crucial time for Ola. Grappling with several factors such as expansion, slow growth, competition with the likes of Uber (SoftBank currently holds a stake if 15 per cent in it), it is not wrong to say that this ride-hailing cab definitely needs a major boost in its operational structure.
According to Mint, last year Bhavish Aggarwal has made some changes in the Articles of Association (AOA). A clause was introduced that would prevent SoftBank from buying any more shares of the ride-hailing firm. The status of this report and report is therefore in a state of limbo owing to the norms of this clause.
SoftBank’s Dominance in the Indian Start-up Ecosystem
SoftBank has been a regular newsmaker when it comes to investment in Indian start-ups. Flipkart, Snapdeal, Hike messenger, Grofers, OYO rooms, the list of this Japanese conglomerate’s investment is long, flashy and very illustrious. SoftBank also has a joint venture with telecom giant Bharti for investments in solar energy in India. The Ola co-founder who is very well versed with the start-up ecosystem in India knows that he needs to play his cards very carefully. The inclusion of the clause last year could be one move to play safe and sustain in the long run.
Only time will tell if this news is true in its truest sense or not but the intentions of the Japanese unicorn are becoming clear and so the potential which they in the Indian start-up ecosystem.