Ola facilitates loans of $850 mn to drivers
Cab aggregator turns aggressive to stay ahead of Uber
Ola Fleet Technologies, fully owned subsidiary of ANI Technologies, signed loans of up to $1.4 billion (~9,500 crore) as of the end of 2016, to lease cars to drivers on Ola’s platform and stay ahead of global rival Uber.
The company utilised nearly $850 million (~5,769 crore) of its total term-loan limit by December 2016, indicating it had become aggressive about leasing cars to drivers and locking them on its platform for three to five years.
Taking an average cost of ~5.76 lakh for a vehicle, it’s very possible that Ola achieved its target of leasing 100,000 vehicles in 2016. The company’s move to lease cars as opposed to operating as a marketplace came when it found itself in a battle with Uber to pay drivers massive incentives to retain them.
Several drivers reported earnings as high as ~1 lakh per month when the battle between the two companies was at its peak, somewhere around mid-2016.
Since then, however, both Ola and Uber have cut incentives being paid to drivers, in many cases forcing them to go on strike demanding better pay. The impact of this is a reduction in the number of cabs available on both platforms, which saw the industry post its first-ever negative growth in the first quarter of 2017.
One of the complaints drivers had been most vocal about is that Ola was diverting business to cars leased through it, creating a shortage of supply for drivers who had signed up independently. Ola at the time had denied those claims, saying its platform was unbiased when it came to providing supply of passengers to cabs.
However, studying the terms of a ~1,000 crore loan deal between Ola Fleet Technologies and YES Bank that was closed on December 30, it is clear that the onus of repayment by drivers is on the ride-hailing company.
“Borrower to ensure the repayment is not affected due to change in government regulation/local laws or any other such incidence which hampers the plying of vehicles,” a document filed with the registrar of companies (RoC) reads. The filings showed that loans have been facilitated by private banks — Axis Bank, HDFC Bank, ICICI Bank and Yes Bank.
Uber, too, has set up a subsidiary, Xchange Leasing, in India to facilitate leasing of cars to drivers who want to work on its platform. Since last year, the USbased company has invested ~250 crore in the arm in two tranches. The investments are seen as part of the $1 billion Uber has committed to India and the portion of the $3.5 billion it raised from the Saudi Public Investment Fund that it said it would also deploy to take on Ola. The $1.4 billion in loans that Ola has in guarantee from banks is a little over 80 per cent of the amount company has raised from investors, of which SoftBank is the largest. The Indian ride-hailing firm has raised nearly $1.7 billion in equity so far and currently enjoys a valuation of $3 billion.
In June, parent company ANI Technologies invested a further ~100 crore in Ola Fleet Technologies, according to documents filed with the RoC. In September 2015, when Ola began leasing cars on its platform, it had said it would invest ~5,000 crore in its leasing arm over the next few years to build a large base of cabs on its platform.
Studying the terms of a ~1,000-cr loan deal between Ola and YES Bank, it is clear that the onus of repayment by drivers is on the ride-hailing company