Ola to Finally Engulf Uber's India Business after '12 Months of Talks'
The rationale behind Uber-Ola deal is simply that for any company it's important to cut their losses if they want a successful IPO
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India's two biggest taxi aggregators Ola Cabs and Uber Technologies Inc are reportedly in talks to merge their operations in India. The deal is said to have been mediated by common investor Japanese investment giant Softbank.
Officials familiar to the deal revealed talks of a prospective merger have been ongoing between both the companies since the last 12 months. However, Uber's Chief Executive Office Dara Khosrowshahi, on his maiden visit to India, had dismissed any plans of a prospective merger saying it's too early for such a move.
According to an insider, Uber losing money in India could be a deterrent to a successful listing next year, and the company is aggressively looking to cap its widening losses.
"The rationale behind Uber-Ola deal is simply that for any company it's important to cut their losses if they want a successful IPO," the person familiar with the deal told Entrepreneur India.
When Entrepreneur India contacted the home-grown taxi aggregator Ola, the spokesperson said, "Ola will always be an active and integral part for decades to come. Softbank and all other investors are committed in realizing this ambition. The company is always actively looking for opportunities for expansion."
While Uber has declined to comment on the news, Khosrowshahi during his India visit had said competition to Ola would only help Uber grow and that the company was confident of their position in the country.
Dismissing this move as a positive one for the industry, globalization & technology analyst Pranjal Sharma told Entrepreneur India that a single player taking the majority chunk of taxi aggregation in India is not the ideal situation.
"The real issue is how the deal will impact consumers and drivers. With a single ride-sharing company, there will be a monopoly situation. Some kind of checks and balances will be required to ensure that consumers are not overcharged and drivers are not exploited. In other countries, there are 2-3 ride sharing companies. In India, there is none apart from Uber and Ola," said Sharma who is also the author of Kranti Nation: India and The Fourth Industrial Revolution.
Ola's Expansion Drive
Ola has been aggressive in its expansion just 5 years since inception. In 2015, the company engulfed then rival TaxiForSure in 2015 for USD 200 million. However, in 2016 Ola had to fold TaxiForSure operations.
Ola then went on to acquire Geotagg - a trip-planning applications company to consolidate its bus shuttle services. In line with its aim to become a technology platform, Ola acquired food delivery app Foodpanda to combat competition to UberEats.
Earlier this year, Ola's founder Bhavish Aggarwal announced starting operations in Australia across Sydney, Melbourne, Perth, Adelaide, Canberra and Brisbane.
Uber's Imminent Exit From Asia
The news of the merger deal has come soon after Uber announced its exit from the Southeast Asian market, where the company sold its local unit to rival company Grab.
Khosrowshahi had then reiterated Uber's commitment to India operations and had said the deal would allow the company to double down to invest aggressively in its core markets, one of which is India.
"We consider India very much as core to Uber's success," Khosrowshahi said earlier this month citing India as one of the top three markets globally including the US and Latin America.
If the deal goes through, Ola will become the sole leader in the taxi aggregation space in India becoming one of the biggest startup success stories from India in a decade.