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Ola! The ride-hailing company sets to turn profitable by next fiscal


Ride-hailing company Ola will turn profitable by 2018-19 and make a profit of over $1 billion by 2021, according to Jain Ambavat & Associates — an independent agency the company employed to value it.

The news was first published by Business Standard.

The report, compiled by Jain Ambavat & Associates in March, was part of Ola’s disclosure to the Registrar of Companies.

According to the agency’s projections, Ola would achieve a net operating profit after tax of $180 million in 2018-19. In the subsequent two years, profits after tax would grow to $510 million and $990 million, respectively.

The accounting firm fixed a fair value of Rs 13,520 for each share of 17,095,119 Ola shares, which takes the total valuation of the company to $3.5 billion.

Last month, Ola raised an investment of $1.1 billion at a clipped valuation $of 3.5 billion.

With the total of 17,095,119 shares in the company as of February 28, 2017, the overall valuation of the company amounts to Rs 23,112 crore.

However, the ride-hailing company reported a consolidated loss before tax of Rs 2,313.66 crore in FY16 compared with a year-earlier loss of Rs 796 crore as it spent heavily on defending its market leadership against US-based rival Uber.

While the company has not disclosed its profit or losses for fiscal 2017, the valuation certificate estimated that losses in the year would fall to Rs 845 crore.

Profitability plan

According to media reports, Ola has been cutting costs over the past 18 months, starting with reducing incentives paid to drivers.

According to research consultancy Redseer’s report, the take-home pay for drivers dropped 33 per cent in the last one year.

The report added that the average income of these drivers, which includes incentives but excludes EMIs on their vehicles, has come down to Rs 21,000 per month in the second quarter of 2017 compared to Rs 31,000-32,000 made during the same quarter in 2016.

The main reason behind the falling incomes of drivers is the rising margins by the company. Earlier, drivers would draw huge incentives, but these have witnessed a 60 per cent drop since last year.

The cut on drivers has immensely helped the cab-hailing company reduce their burn rates. Ola has seen its monthly burn come down by almost half compared to the previous year at $20-25 million, according to an ET report.

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