India's largest cab-hailing service Ola (owned by ANI Technologies Pvt Ltd) has raised $1.1 billion in fresh funding from China's Tencent Holdings Ltd and existing investors including Japan's SoftBank, adding ammunition to its rivalry with San Francisco-headquartered Uber Technologies Inc.
Today, Bengaluru-headquartered Ola said it was in advanced talks to raise another $1 billion from existing and new investors, thus making it an over $2 billion funding round. Ola didn't share how it was valued in the current funding round.
Ola said it will be using the capital to make investments in supply, technology, and cutting edge innovations for the country's unique transportation needs. These include artificial intelligence and machine learning capabilities.
With a presence in 110 cities, Ola has a wide lead over Uber, which at present operates in 29 cities. But Uber has been increasing the pressure with aggressive promotions. India's transportation market is estimated to be worth $10 billion.
"We are thrilled to have Tencent Holdings join us as new partners in our mission to build mobility for a billion Indians. The transportation and mobility industries are seeing huge changes globally. Our ambition is to build a globally competitive and futuristic transportation system in India that will support and accelerate a nation on the move," Bhavish Aggarwal, chief executive officer and a founder of Ola, said in a press statement.
Ola's is the latest in a series of billion-dollar funding rounds in the Indian start-up ecosystem, with both Flipkart and Paytm having raised massive amounts of capital this year. Flipkart leads the charts, having raised at least $2.8 billion in two separate tranches from SoftBank, Tencent, eBay and Microsoft, while Paytm raised $1.4 billion from SoftBank earlier this year.
According to Mint, the latest funding in Ola is also a clear sign of the largest investors in India's start-up ecosystem closing and consolidating ranks, with Alibaba and SoftBank forging an informal alliance on the one hand, and Tencent and Naspers combining forces on the other.
These investors have put their full weight behind the consumer internet ''unicorns'' that they perceive to be the outright winners in their respective categories despite threats from multinational rivals such as Amazon India and Uber Technologies.
Ola, the third-most valuable start-up in the country, has been trying to raise fresh capital since June 2016. It has earlier received at least Rs2,345 crore from SoftBank Group Corp.
Prior to this round, Ola got a pre-money valuation of roughly $3-3.3 billion, a sharp drop from the $4.5 billion valuation it commanded in September 2015. Pre-money refers to the valuation excluding the current round's cash infusion.
Uber Technologies, the world's most valuable start-up, is also in talks to raise funds from SoftBank. After it sold its Chinese business to Didi Chuxing in August, succeeding in India has become one of the top priorities for Uber. Those priorities have not changed under new chief executive Dara Khosrowshahi.
Ola reported a seven-fold jump in revenue to Rs758.23 crore in the year ended 31 March 2016, but losses nearly tripled to Rs2,313.7 crore because of heavy discounts to customers and spending on incentives to its drivers.