Bengaluru: Ride-hailing service Ola has pumped Rs50 crore into its leasing subsidiary, Ola Fleet Technologies Pvt. Ltd, according to regulatory filings. This is Ola’s first significant capital infusion into the entity since its acquisition two years ago.
Ola bought Delhi-based radio taxi service provider GCabs, owned by Apra Cabs India Pvt. Ltd, for an undisclosed amount in January 2015 and renamed it Ola Fleet Technologies.
According to the documents filed with the Registrar of Companies, Ola’s parent, ANI Technologies Pvt. Ltd, made the investment in Ola Fleet Technologies on 30 December. Incidentally, Ola announced the appointment of former SAB Miller India executive Salabh Seth as the chief executive of its leasing subsidiary in January, signalling its intent to scale up the vertical.
In September 2015, the company appointed Rahul Maroli, a former LeasePlan Corp. NV executive, to build the leasing business. Maroli assumed charge of Ola Corporate, the company’s offering for businesses, and the rental and shuttle verticals in January this year, after the appointment of Seth.
Ola was persuading drivers to sign up with a lower upfront payment for cabs, zero commissions and new car models to expand its leasing programme, which had struggled in the first year of launch,
At the launch of the leasing programme in September 2015, the company had said that it, along with financing partners and carmakers, would invest Rs5,000 crore in the cab-leasing programme over a year.
Rival Uber Technologies Inc. also made significant investments in its leasing subsidiary Xchange Leasing India Pvt. Ltd last year. The company pumped in Rs201 crore between June and September and Rs43 crore between January and March, taking its total investment in the entity last year to Rs244 crore.
“The companies are pretty much cognizant of the capital intensiveness and challenges of the leasing industry. But not having these entities will make you extremely reliant on other players in the ecosystem for functioning. You might as well create your own infrastructure to reduce dependence, given that you have good demand on your platform,” said Sandeep Ladda, partner and national leader of technology and e-commerce sector practice at PwC India. “Besides, they can always get an investor in the leasing entities, who is strategic in nature, if need be.”
It is crucial for Ola and Uber to expand the leasing programme quickly because the supply of cabs has stagnated since late 2015 after a two-year surge when the lure of professional independence and high earnings brought cab drivers in hordes to Ola and Uber India.
The leasing schemes address major pain points for ride-hailing services: they enable them to lock in a driver on their platforms for the duration of the lease—anything between three and four years—as well reduce spending on driver incentives and ensure a steady supply of cars.
Ola, for instance, does not pay additional incentives to drivers over and above the fare under this initiative, as is the case with drivers who come in with their own cars, Mint reported in September.
Ola and Uber together clocked a nearly four-fold increase in the number of rides booked through their platforms in 2016 from a year earlier, according to a report by market research and advisory firm RedSeer Management Consulting Pvt. Ltd.
The SoftBank Group-backed unicorn has struggled to attract new investors. Ola last raised funds at a peak valuation of $5 billion. On 3 February, Mint reported that US-based investment firm Vanguard Group had slashed the valuation of its stake in Ola by over 40%.