Ola raises $50 million from new investors; aims to reduce power of Softbank

The China-Eurasian Economic Cooperation Fund is an equity investment vehicle to further China's Belt and Road Initiative

Home-grown ride-hailing major Ola has raised $50 million in funding from two new investors, including a Chinese state-backed fund that was set up with a mission for deepening economic cooperation between China and the Shanghai Cooperation Organisation region.

Ola issued 250,000 preference shares divided equally between Hong Kong-based private equity fund Sailing Capital and the China-Eurasian Economic Cooperation Fund (CEF), documents filed with the Registrar of Companies, which were sourced from Paper.vc, showed.

The investment was part of Series I 2 round in which the company raised $50 million from the two investors at a valuation between $3.7 billion and $4.2 billion. Ola had closed its Series I 1 round in September 2017 and Series I 3 round in December of the same year.

The CEF was announced by Chinese President Xi Jinping in 2014, with an initial size of $1 billion, as an investment vehicle for further realising the country’s Belt and Road Initiative. The Indian government has strongly opposed the Chinese project as it cuts through the disputed territory in Kashmir.

After the investment, the Chinese state fund along with Sailing Capital will own close to 1.2 per cent stake in the Indian ride-hailing firm. The formalising of the investment comes at a time when Ola is in talks with multiple investors to raise as much as $1 billion to take on rival Uber, not just in India but also overseas markets such as Australia and the UK.

The Economic Times reported last month that Singapore’s sovereign wealth fund Temasek had invested as much as $225 million in Ola to pick up a high single digital stake in the company. The deal was said to have given exits to several early investors in Ola, including the buyback of employee stock ownership plan from some employees.

Sources say that Ola is looking for money from new investors to reduce the power of its largest investor SoftBank, which now owns a little over 25 per cent stake in the company. Last year, Ola founders Bhavish Aggarwal and Ankit Bhati had blocked a move by SoftBank Chairman Masayoshi Son to purchase shares from the company’s second largest investor Tiger Global.