Ola raises $500-mn term loan, in talks to raise $1 bn at $7.5-bn valuation

IPO-bound firm is likely to use the loan to fuel its vision for future of mobility across businesses including ride-hailing, vehicle commerce, delivery with foods, quick commerce & financial services

IPO-bound mobility platform Ola, said it has successfully raised $500 million via a Term Loan B (TLB) from marquee international institutional investors. This term loan has no impact on the valuation of Bhavish Aggarwal-led Ola.

The Bengaluru-based firm recently raised $139 million. This is part of a $1 billion funding round for which the company is in talks with investors, increasing its valuation to about $7.5 billion, according to the sources.

Ola said the proposed loan issuance received a staggering response from investors with interest and commitment of approximately $1.5 billion. A term loan provides borrowers with a lump sum of cash upfront in exchange for specific borrowing terms. Term loans are commonly granted to small businesses that need cash to purchase equipment, a new building for their production processes, or any other fixed assets, according to experts.

Ola said it is one of the first Indian startups to be publicly rated by Moody's and S&P, two of the leading international rating agencies. S&P and Moody's rated Ola’s first-lien term loan as B- and B3 respectively, with a ‘stable’ outlook, on the back of strong unit economics and profitability in its market-leading Indian ride-hailing business.

“The overwhelming response to our term loan B is a reflection of the strength of our business and our continued focus on improving unit economics alongside rapid growth,” said Bhavish Aggarwal, founder and CEO, Ola. “At Ola, we are accelerating our journey towards building the New Mobility ecosystem to help a billion people move sustainably.”

SoftBank-backed Ola said this is a milestone transaction as Ola is among only a few Indian companies to raise capital through the TLB route. Ola is expected to utilize the term loan to fuel its vision for the future of mobility across its various businesses including ride-hailing, vehicle commerce, delivery with foods, quick commerce and financial services.

JP Morgan and Deutsche Bank served as the joint lead arrangers for this financing.

The new funding comes at a time when Ola’s transportation business had been badly hit by the pandemic. However, sources said that while Covid-19 brought its business down, it used the pandemic to improve its unit economics.

Ola is in talks to raise over $1 billion in funding through a mix of equity and debt over the next few months as the ride-hailing platform prepares for hitting the IPO route next year, according to sources. Ola is in discussions to raise a pre-IPO round of over $1 billion at a valuation of $7.5 billion.  The firm competes against US-based Uber and is planning a public offering sometime next year.

Aggarwal, a computer engineer from the Indian Institute of Technology, Bombay, founded ride-hailing firm Ola in 2010 along with his college mate Ankit Bhati. Ola was valued at $6.5 billion when it raised funding from South Korean vehicle maker Hyundai in 2019. Ola has raised a total of $4.4 billion from the investors.

In July this year, Ola, said Temasek and Plum Wood Investment Ltd, an affiliate of Warburg Pincus, were partnering company founder Bhavish Aggarwal for a $500-million investment ahead of its initial public offering (IPO). Warburg Pincus was a new investor and Singapore-based Temasek, an existing investor since 2018, according to the sources. This was mainly a secondary transaction.

According to sources, in that financing round, Temasek and Warburg bought shares worth $500 million from two of Ola’s existing investors. They had said Tiger Global and Matrix Partners India, both of which hold 13-15 per cent in Ola, had sold shares in this round. Tiger Global has partially exited. Japan’s SoftBank had held 22 per cent and China's Tencent had about 9 per cent in Ola.

Ola recently raised about $139 million from few investors including IIFL, Edelweiss, and Sunil Munjal-led Hero Enterprise, show regulatory documents sourced from business intelligence platform Tofler. Ola allocated 4,63,471 Series J1 Compulsorily Convertible Preference Shares (CCPS) at a premium price of Rs 22,625 per share, as per the filings. It may be pre-IPO financing round, according to the analysts, as the firm is preparing to file its draft IPO documents.

Hero Enterprise had invested about Rs 112 crore. Edelweiss had invested about Rs 250 crore. IIFL has invested about Rs 187 crore. Ola had also allotted shares worth Rs 100 crore to former Zandu promoters Parikh family and Siddhant Partners. Ola had also allotted shares worth Rs 50 crore to Biovet, an animal health vaccine maker. Vicco Group has been allotted shares worth Rs 10 crore. Also shares worth Rs 13 crore have been allotted to Famy Care Group's Ashutosh Taparia and Sanjeev Taparia.

The filing also showed that the SoftBank-backed firm paid Rs 26 crore to acquire geospatial services provider GeoSpoc. In October this year, Ola said it has acquired Pune-based GeoSpoc, a leading provider of geospatial services. GeoSpoc co-founder Dhruva Rajan and his team of Geospatial scientists and engineers had joined Ola to develop technologies that will make mobility universally accessible, sustainable, personalised, and convenient, across shared and personal vehicles.

In another development, Ola Electric, the ride-hailing firm's electric vehicle arm, recently also raised about Rs 398 crore from investors such as Paytm founder Vijay Shekhar Sharma’s VSS Investco and private equity firm DST Global's Rahul Mehta. Other such investors include IIFL, Edelweiss and Temasek, Singapore’s state-backed investment company

In October this year, Ola Electric, raised over $200 million led by Falcon Edge, Softbank and others, tripling its valuation to $3 billion. In July 2019, Ola Electric raised $250 million from Masayoshi Son’s SoftBank. It was just a two-year-old firm at that time. The investment made the fledgling venture a “unicorn”, or a start-up valued at more than $1 billion.

The funding is helping Ola to accelerate the development of other vehicle platforms including electric motorbike, mass-market scooter and its electric car. It is also helping it to strengthen Ola’s ‘Mission Electric’- which urges the industry and consumers to commit to electric and ensure that no petrol two-wheelers should be sold in India after 2025.

Ola Electric has built its Futurefactory. At full capacity of 10 million vehicles annually, it would be the world’s largest two-wheeler factory and would handle 15 per cent of the world capacity. It is also the world’s largest factory that is entirely run by women. At full scale, it will have over 10,000 women employed.

Ola Electric, began deliveries for Ola S1 scooters from Wednesday. Special events were organized for the first 100 customers today in Bengaluru and Chennai where they came with their friends and family to ride Ola S1 and S1 Pro.

“We are working hard to ramp up the production at the Ola Futurefactory to get the scooters in the hands of our customers as per their delivery windows,” said Varun Dubey, chief marketing officer, Ola Electric.