Ola rides into profitability, but IPO not yet

‘Ola in India makes money on every ride. Our focus over the past couple of years has been to keep growing the market and our share in the market and build up on sustainable business,’ says co-founder and CEO Bhavish Aggarwal.

After years of intense competition and burning millions of dollars, India’s ride-hailing giant Ola claims it has come out on top of its main competitor Uber and is now making a profit on every ride it offers in India.

Co-founder and Chief Executive Officer Bhavish Aggarwal said the company was operationally profitable and would soon become cash flow positive.

“Ola in India makes money on every ride. Our focus over the past couple of years has been to keep growing the market and our share in the market and build up on sustainable business,” Aggarwal said at a fireside chat in Bengaluru on Friday.

Turning a profit would essentially bring down the firm’s reliance on raising capital from investors to grow its business in the country and beyond. Ride hailing has been termed as one of the most capital intensive businesses.

However, unlike more traditional companies, Aggarwal said Ola would not push to go public immediately after making a profit.

“The ambition for me and (co-founder) Ankit Bhati has always been to build a sustainable, long-term, independent business. And, in that direction, we are definitely going to IPO. Our goal is to aim for an IPO in the next three-four years,” Aggarwal said.

These comments come at a time when some of the early investors in Ola are looking for exits, both partial as well as full. The company has been in talks with Singapore-based Temasek Holdings to pick up shares on the secondary market.

Mint reported on Friday that Temasek had bought shares worth $30 million from early and existing employees of Ola at a valuation of $2.5-3 billion. Business Standard could not ascertain if the deal had indeed been completed.

By showing certainty over future plans, Aggarwal brushed off concerns that SoftBank, its largest investor, was trying to steer the company in a different direction.

Sources in the know have said that the Japanese investor had asked Uber and Ola to consider a merger (SoftBank is also the largest shareholder in Uber). Talks reportedly fell apart after neither side was able to agree on any terms.

“We are probably among the few large Indian internet companies that are independent. SoftBank is a shareholder, they have a voice at the table, but that’s only one voice. In the end, we do what the entire group of shareholders or stakeholders jointly feel is valuable,” Aggarwal said at the event.

In a valuation document that Business Standard had reviewed last year, Ola had said it would turn profitable by FY19, projecting to earn a profit of Rs 11.7 billion in that year. The document added that the firm would earn Rs 64.23 billion in profits by FY21, equating to almost $1 billion in projected profits. The valuation of the company according to that document stood at about $3.5 billion.

Photograph: Shailesh Andrade/Reuters.