Ola’s parent company ANI Technologies has pumped in Rs 50 crores in its cab leasing business Ola Fleet, according to the filings with the Ministry of Corporate Affairs. In return, Ola Fleet has allocated 50 million equity shares at a subscription price of Rs 10 apiece.
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.
This is the third investment by Ola in its cab-leasing arm in eight months. In July this year, the ride-hailing company had infused Rs 100 crore in Ola Fleet.
In March, the Indian cab-hailing giant had invested Rs 50 crore into its leasing subsidiary, which was Ola’s first significant capital infusion into the entity since its acquisition two years ago.
The entire proceeds are meant to onboard more drivers and compete fiercely with Uber, which had pumped in about Rs 250 crore last year into its leasing subsidiary, Xchange Leasing India.
Last month, in its effort to maximise cab-leasing services, Ola had raised Rs 1000 cr ($156.3 million) in a debt funding from Yes Bank.
According to media reports, Ola had signed loan deals of up to $1.4 billion (Rs 9,500 crore) in 2016 to finance cars to drivers. The company utilised Rs 5,769 crore ($ 850 million) of its total term loan limit by December 2016.
The massive utilisation suggests Ola’s aggressive play in leasing out maximum number of cabs to drivers to outplay Uber.
Earlier this year, Ola and Uber had witnessed a 25 per cent drop in the number of cars listed to their platform due to drop in drivers’ incentives and incomes. According to a report by Redseer Management Consulting, on-demand cab industry, which had always reflected positive growth, recorded a negative growth in the first quarter of 2017, owing to the shortage of cabs.
However, despite all efforts, the cab leasing business of both Ola and Uber are facing a series of setbacks, including driver exits and defaults on car loan EMIs following dwindling driver incomes.
In May, State Bank of India had suspended car loans for Uber and Ola taxis, following loan defaults of about Rs 120 crore due to non-payment of dues by drivers. The bank had also seized 300 cars owned by both companies.
According to a Wall Street Journal report, Uber is planning to shut down Xchange Leasing LLC, its auto-leasing business in the US. The cab hailer had sustained 18 times more expense money per vehicle-unit.
In March, Reuters had reported that Uber’s Indian subsidiary was also reviewing its cab-leasing programme, following large-scale returns of leased cars by drivers, who quit over falling incomes and incentives.