ola, uber

On the heels of its massive $350 million capital infusion last week, Ola has today announced that it is going to invest ₹50 crore in its taxi leasing unit Ola Fleet. This is the first major capital infusion in the cab leasing unit from Ola.

The company bought Delhi-based radio taxi service provider GCabs, owned by Apra Cabs India Pvt. Ltd, for an undisclosed amount in January 2015. After the acquisition, Ola renamed it to Ola Fleet Technologies.

According to documents filed with the Registrar of Companies, Ola invested in Ola Fleet on 30 December. Thus, the investment was made a few days before it officially announced the appointment of former SAB Miller India exec Salabh Seth as the chief executive of its leasing subsidiary.

In 2015, Ola had announced setting up of a captive leasing subsidiary to finance cars to be added to its platform and make investments of around ₹5,000 crore in the said unit. However, Ola isn’t the only player in the cab leasing market. Its arch-rival Uber Technologies Inc. has also made significant investments in its leasing subsidiary Xchange Leasing India Pvt. Ltd last year.

As per reports, Uber has pumped in ₹201 crore between June and September and ₹43 crore between January and March, taking the total investment in the entity last year to ₹244 crore.

Leasing schemes address one of the major pain points for ride-hailing services. It enables them to lock in a driver on their platform for the duration of the lease –anything between three and four years– as well as reduce spending on driver incentives and ensure a steady supply of cars.

Recently, SoftBank-backed Ola was struggling to raise a new funding round for quite some time. However, the company finally scored fresh funds a couple of days ago. It raised $350 million from its existing investor — SoftBank, in what is said to be a down round.

With the new round of funding, the valuation of the company is now estimated at $3.5 billion from the earlier level of $5 billion. The last raise for Ola was in December 2015 when Vanguard Mutual Funds poured in $57 million at a valuation of $5 billion. But, it was also the first one to cut its valuation down by 40 percent.

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