Ola gets a runway extension to figure out a balance between growth and cash burn

Photo credit: Pixabay.

Indian ride-hailing app Ola has US$365 million in fresh ammunition to continue its battle with Uber for dominance of the Indian market. Biz tycoon Ratan Tata’s investment firm and Falcon Edge contributed US$104 million to this funding round, on top of the US$261 million from Ola’s biggest investor SoftBank, regulatory filings show.

Tech in Asia earlier reported that Ola had secured the new funding at a valuation of US$3.5 billion, 30 percent lower than what it was in November 2015 when it raised US$500 million. Last year, SoftBank wrote down its investment in Ola as the Indian market went into a correction phase.

The fresh funding comes at a time when both Ola and Uber are figuring out the right balance between cash burn and growth. A cutback of incentives for drivers led to strikes earlier this year.

See: Meru strikes while the iron is hot, even as Uber and Ola are in limbo

The discontent continues to simmer, judging from chats with Uber and Ola drivers. Market research firm RedSeer has found that the ride-hailing apps in India saw a drop in number of rides for the first time in the first quarter of this year.

Uber started a leasing program for drivers in partnership with a Mumbai firm, but had to put it on hold as drivers started returning the leased cars when their incentives were cut. Ola, meanwhile, is trying to revive its own leasing subsidiary, Ola Fleet, to improve the supply of cars in the market. Banks are reported to have become tight-fisted over car loans for Ola or Uber drivers after a drop in their income.

Tech in Asia has reached out to both Ola and Uber for comments on the way forward after the cutback of incentives and fall in rides.