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On August 30, Ola’s board approved the raising of $400 million from investors to “strengthen the financial position of the company” according to documents filed with the Registrar of Companies filed in September.
While Ola continues to lead in terms of market share in India, in the top seven to ten cities in the country, both it and Uber are neck to neck in terms of market share, say analysts. In the past year however, growth in India’s ride hailing market has slowed as both players have begun reducing cash burn, starting with cutting incentives paid to drivers. This has led to thousands of drivers moving off the two platforms.
Softbank’s participation in the round comes as the company is looking to lead an investment of as much as $20 billion in Uber’s global operations. If the deal goes through, Softbank will have significant power in both Uber and Ola, allowing it to dictate the fate of India’s fledgling ride hailing space.
However, news agency Bloomberg last month had reported that a truce between Uber and Ola in India was not among the clauses the investor had put forward to the US ride hailing company. That said, it is highly unlikely that Softbank will be willing to lose money on both fronts as the two companies burn cash to gain leadership in India.
Ola will become the second Indian startup to raise $2 billion or more in a single funding round, only after Flipkart, which closed a $2.5 billion funding round from Softbank recently. Softbank on the other hand has emerged as the largest venture capital investor in the country, claiming that the valuation of its investments in India tops $6 billion.