Indian cab behemoth Ola has made a slew of significant changes to its internal organizational regulations. As per the changes, more power has been delegated to the company’s founders while the influence of investors, has been brought under check.
The main changes have been made to the article of association, which is the one of the most important documents when it comes to a company’s operations. These changes were made by ANI Technologies Private Limited, Ola’s parent firm. They were actually made in April however, it is only now that these changes have come to the surface.
According to the changes, investors will now need the approval of Ola’s founders— Bhavish Aggarwal and Ankit Bhati —as well as the company’ board, when they want to purchase additional Ola stock. Investor’s approval will now be needed for acquisitions, joint ventures and partnerships involving 2000 crore+ worth of investments. Meanwhile, Annual business plans, ESOPs increase and loans no longer need a green light from investors.
The way I see it, Ola is in a bit of a spot right now. The company is facing off against Uber, the world’s most valuable startup who has pretty deep pockets. The company needs money to be able to keep competing on equal terms with Uber, even when it is the former’s home turf. And to raise money, it is going to have to sell stock. However, this will in turn dilute the founder’s holdings and weaken their control over the company — leaving it vulnerable to investors.
How many times have wee seen founders ousted from their own companies after they stretched their necks just a bit too far, when they took on too many investors, or diluted their own holdings a tad too much. Look at Flipkart for instance, both of the company’s founders are no longer leading from the front. A candidate appointed by its investors is now the CEO. Look at Snapdeal, the company which was once valued at over $6 Billion s now selling itself for merely 1.
Look at foreign companies for instance. Enterprises like Google and Facebook have already crossed this bridge and come upon the novel idea of giving founders more voting rights per share. This way, as long as they maintain a certain percentage of holdings, they can continue to exercise control over their respective companies.
Meanwhile, the two Ola founders are expected to receive an additional 520 crores, in form of 4 Lakh fresh shares issued to them — so as to maintain their holdings above a certain level. After its last fundraise from Softbank, which saw the cab aggregator valued at around $3.5 Billion, the Japanese investment firm holds around 30 percent stakes in the company — making it a very powerful force to reckon with within Ola.
Indeed, Softbank had offered to invest $1 Billion in the company in its fundraise last year. However, Ola CEO Bhavish Aggarwal decided to take merely a quarter of that amount — and thus keep Softbank from gaining controlling stakes — and raise the rest of the money elsewhere.
