Shubham Saroj
Introduction – Ola cabs is an Indian ridesharing company which offers services that include vehicle for hire and food delivery. The company was founded by Bhavish Aggarwal and Ankit Bhati in 2010.
The company is based in Bangalore, India and has their headquarters in the same city. Ola is currently active in 250 cities having 1.5 million drivers in India.
In January 2018, Ola extended into its first overseas market, Australia, and in New Zealand in September 2018.
In March 2019, Ola began its UK operations introducing auto rickshaws in UK. More than 10,000 drivers have applied both in online and offline mode ahead of its launch in London. In February 2020, Ola launched its taxi-hailing services with over 25,000 drivers registered.
But in October 2020, Ola was banned in London due to breach in safety rules.
From a small startup to a unicorn, the journey has been amazing but the rise, respect and recognition came with a lot of ups and downs. They grew rapidly and gained a lot of market but now they face 2 big problems.
The 1st problem is the global pandemic and a complete lockdown due to it. The 2nd problem is the anger they face from their cab drivers. A global pandemic and drivers protesting for higher wages, it seems like a perfect recipe for disaster.
As of writing this blog, even I can’t say what future holds for Ola and it drivers. The pandemic has been ruthless for them as it wiped out more than 50% of their revenues.
The demand is slowly coming back and travel restrictions are being lifted by the government but the question still looms for Ola. Will they ever be able to make a comeback and resolve their conflict with their drivers?
We are going to answer it today.
Struggles & Early Days – The story of Ola is quite interesting. One fine day Bhavish Aggarwal was travelling by a rented car from Bangalore to Bandipur. You could never imagine what happened next.
He had a dispute with his driver as the driver demanded extra cash to continue the ride. He was quite furious at the driver and refused to give him extra money. Then, the driver left him stranded in the middle of nowhere.
He then realized that there is a huge problem (limited availability & uncertain pricing) which might be faced by millions of others as well. But if there’s a problem, then there’s an opportunity as well.
OlaCabs is the result when he realized that he could capitalize on the opportunity and fill demand-supply gap with his solution. Later, he was joined by his co-founder Ankit Bhati.
Together both of them started working on Ola and created a digital way of connecting cab drivers with passengers where one would have the facility to book a cab at his doorstep whenever he wants. This was also feasible for cab drivers as they could work in flexible hours as they desired.
To attract as many passengers as possible, Ola gave cashbacks, referrals, huge discounts, etc. To attract as many drivers as possible, Ola gave huge incentives, charged less commissions and helped drivers to finance a car easily.
At a particular time, Ola became the fastest growing unicorn in India and became a hit in young people who started using its services more frequently.
Marketing Strategy – Ola once came up with a marketing campaign called #FarakPadtaHai, which was an initiative to reduce traffic and carbon footprint while we travel and encouraged people to carpool more often.
Recently, Ola also encouraged its customers to share their Ola stories where their drivers went above and beyond their call of duty by using #HerosOfOla which would recognize extraordinary drivers.
User Base & Valuation – Ola has more than 100 million android app downloads. According to the Ola, they have a total of 150 million users who avail 2 million rides every day.
It was once valued at nearly $6-$7 billion but due to the pandemic its valuation has nose-dived and is now in the range of $3 billion. This pandemic has actually been ruthless for many unicorns that were aspiring to be the next big thing.
Funding & Shareholdings – Ola has received a total of $3.8 billion in funding over 25 rounds from a total of 44 investors.
Major investors include SoftBank, Tencent Holdings, Temasek Holdings, Hyundai Motor Company, Kia Motors, China Eurasian Economic Cooperation Fund, Sailing Capital, Sachin Bansal, Steadview Capital, Eternal Yield international, Deshe Holdings and DIG Investment.
As of 2018, Ola’s major shareholders are as follows:-
| Shareholders | Shareholdings |
| Bhavish Aggarwal | 6.7% |
| SoftBank | 26.1% |
| Tiger Global | 15.94% |
| Tencent | 10.39% |
| Matrix Partners | 8.57% |
| DST Global | 6.72% |
Revenues & Losses – Ola recorded a significant spike of 37.7% in operating revenue during Fiscal Year 2019 by earning Rs 2,543.63 crores. This number stood at Rs 1,847.53 crores in 2018. It was also able to trim its losses by 9% as the total expenses were limited to a growth of 6.3%.
Total expenses grew by around Rs 319 crore to Rs 5,385.81 crore in FY19 from Rs 5,066.6 crore in FY18. The total losses for the firm witnessed a decline of around 8.8 %, amounting to Rs 2,593 crore in FY19.
A 38% jump in operating revenue and shrinking of losses by about 9% are good signs for the Ola.
Controversies – The major controversy in Ola was with those drivers who were initially lured with the dream of earning (Rs 1,00,000 – Rs 1,50,000) per month. In the initial days, Ola tried to attract a lot of drivers with huge incentives and low commissions.
Very soon some drivers were actually able to achieve this dream of earning more than Rs 1 lakh per month in big metro cities. They were happy with their job and were also willing to drive 12-15 hours per day just to make the most of it.
The news spread like wildfire and a lot of people took notice. The same thing happened with Ola what happens with a bubble. People tried to cash in on the golden opportunity.
In order to drive for Ola, some left their 9-5 jobs, some sold their land, some mortgaged their houses and some even sold their jewellery to take loans in order to buy cars.
Soon Ola had enough humans to drive to for them but then the bubble burst and the demand fell flat as the space for drivers was saturated. Ola had spent a majority of investor’s money in order to grab both passengers and drivers and now it was their time to cash in and make their company profitable.
They gradually reduced the incentives from 90% to 10% and at the same time increased the commissions from 5% to 25%. The fares for passengers were also increased.
This took a hit on the demand for daily cab bookings. The drivers who used to earn more than Rs 1 lakh per month were now earning just Rs (20,000-30,000) per month.
Many drivers were upset as they had taken huge loans to buy a car and were unable to pay for even their EMIs. People now were finding it hard to go back in their 9-5 jobs where pay was nothing as compared to what they were earning with Ola in their initial days.
One driver said, “My EMI is around Rs 10,000 and I now earn approx Rs 25,000. With fuel hikes and maintenance costs, how will I make a living for myself and my family?”
The golden run had soon ended for Ola and their drivers. This created a rift between them and since then, there have been multiple strikes from time to time across major cities against Ola by their drivers.
Present Conditions & Future Goals – Ola announced to fire 1,400 employees as the company had been going through a tough time due to the Covid-19 lockdown. According to Ola, loss of revenue had made it to lay off people. The company has been facing over 90% of business losses in the recent months.
Bhavish Aggarwal wrote an email to his employees to inform them about job cuts. “In these circumstances, today I write to all of you with the toughest decision I have ever taken – the need to downsize our organization and let go of 1400 of our valued employees,” mentioned his email.
The development comes soon after its arch-rival Uber also let go of up to 700 employees in India and thousands across the world. Companies in travel, hospitality, and mobility space are suffering the most.
In total, Ola has laid off about 30-35% of its total 6,000 workforces. The company had fired over 500 employees in December, 2019. For driver-partners across the country, Ola will provide lease rental waivers for over 30,000 leasing drivers giving them relief of up to Rs. 25,000 a month.
The company wanted to have an IPO in 2022 but with the pandemic in place and most of their revenues gone, they will have to wait for a couple of more years, firstly to become a bit stable and secondly to launch an IPO when the time is right.
Ola also has plans to go electric. Ola Electric Mobility was started with US$56 million of funding in February 2019. The funding was provided by Tiger Global and Matrix India.
The company announced on 6 May 2019 that Ratan Tata had invested an undisclosed amount in Ola Electric as part of its Series A round of funding.
Ola Electric raised $250 million from SoftBank during Series B round funding in July 2019, earning a valuation of over $1 billion.
According to Ola Electric, it will need more capital to achieve its target of putting 10 lakh (1 million) EVs on the roads by 2021.
The Big Question – Now the big question arises. Can Ola win the trust of its Drivers and bounce back after this pandemic? Frankly speaking, Ola will have a really tough time to get back in business.
Their dreams of having an IPO by 2022 and becoming profitable have completely shattered and now they have to rethink their priorities and reconsider their expansion strategy.
As of now, their most important priorities should be to
- Resolve conflict with their drivers,
- Work on sustainability and
- Look for yet another round of funding to inject some cash for smooth operations.
