MUMBAI, (Reuters Breakingviews) - India is the new big-money problem in ride-hailing. The parent company of homegrown operator Ola has disclosed that it lost over $700 million in the year to March 2017. That makes the country almost as expensive a place as China was for Uber to burnish global credentials before it sold out to a local rival. With the U.S.-based company committed to India, losses will probably keep piling up.
Ola is privately held, and only reveals finances with a long time-lag. The latest filings show losses widened significantly, from about $460 million a year earlier, even as revenue increased 70 percent. If the pain continued at the same pace in the 12 months since, Ola could now be hemorrhaging over $1 billion. It raised $2 billion of new funding late last year at a $7 billion valuation, according to media reports.
When Uber was being run by founder Travis Kalanick, it was burning through a similar sum in the People’s Republic before handing over its operations to Didi Chuxing in 2016 in exchange for a minority stake in the combined company. In India, Uber is only 10 percentage points behind Ola in terms of market share, according to Counterpoint Research. That’s a narrower gap than Uber faced in China.
This helps explain why under new boss Dara Khosrowshahi, Uber is doubling down on investments in its core markets, including India where it says it has no interest in entering a minority deal with its larger local rival. That is despite both companies sharing a large common shareholder in Masayoshi Son’s SoftBank.
It also underscores the urgency of the first push overseas, into the Australian market, by Ola boss Bhavish Aggarwal. The move represents an intrusion into one of Uber’s strongholds, which suggests that Son has limited clout when it comes to preventing costly competition among his many investments across the ride-hailing industry.
Generating profit Down Under would help Ola with its fight back home against Uber, which can use cash from more developed markets to subsidise operations in developing ones. Yet Didi also announced on Friday it was heading to Australia, so the market may not long be a lucrative one. For now, however, India is the battleground draining resources apace.
- The parent company of India’s Ola Cabs, ANI Technologies, reported a wider annual loss of 48.9 billion rupees ($721 million) as revenue increased 70 percent in the year ended March 31, 2017, according to documents filed with the companies registrar in June 2018.
- The privately-held ride-hailing company backed by Japan’s SoftBank lost 31.5 billion rupees in the previous year.
- On June 15, Chinese ride-hailing group Didi Chuxing said it was expanding to Australia as part of its push into international markets. Ola announced plans in January to enter the market in its first push abroad.
(Editing by Jeffrey Goldfarb and Sharon Lam)
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