Ola on path to profitability with 42% control in losses and 61% revenue hike

The home-grown Indian ride-hailing major Ola had claimed that it was on a path to profitability. In its latest revelations of Annual Reports via RoC filings with Ministry of Corporate Affair, it turns out that the claim isn’t untrue.

The company has reported a 60.98 per cent increase in the consolidated revenue in FY18. The figure rose from Rs 1,380.7 crore in FY17 to Rs 2,222.6 crore.

At the same time, it was also able to control its consolidated losses by  41.97 per cent to Rs 2,842.2 crore, from Rs 4,897.8 crore in the previous fiscal.

On a standalone basis as well, the company showed a significant decrease in losses to Rs 2,676.7 crore and the revenue showed a smaller increase of 44.6 per cent to Rs 1,860.6 crore in FY18.

When compared to the performance in FY17, this is definitely closer to being on the path of profitability. In the fiscal ending March 2017, while the company had reported a 70 per cent rise in revenue, the losses had also shown a significant increase.

Improving profitability metrics, albeit, at a smaller revenue growth rate is the way to a healthier business, and the Bhavish Aggarwal led company seems to follow this.

Fluctuation in scales and new forays

This attitude isn’t just reflected in the company’s balance sheets, but also its decisions. Recently, the reports have sprung up that the company is planning to scale down foodpanda because of the capital-consuming nature of the business.

The company had realised that food delivery had become a business of loss-making revenue, due to the presence of deep-pocketed rivals like Zomato and Swiggy offering deeper discounts. This realisation combined with Ola’s strong determination to stay on the path of profitability had called in for the scaling down decisions.

Foodpanda, in itself, had been the major highlight of the company’s latest reported fiscal FY18, where it had acquired the company from Berlin-based food tech giant Delivery Hero.

Post acquisition, Ola had shifted best of its teams and executives to foodpanda and had become bullish on it to make it the third best in the country, but had later pulled back the energy due to aforementioned realizations. It is now only going to focus on cloud kitchen private labels in food tech space.

One wonders if Ola’s revenue growth would have been higher if the focus hadn’t been shifted to foodpanda in the last quarter of FY18.

During FY18 and CY18 both, the company has picked up funds across several tranches. However, a few important transactions were the ones where secondary stake sales were delivered and ESOPs were encashed.

With these funds, the company has forayed into several service provisions, acquisitions, and investments across FY and CY18, some of them being OlaPedal, HolaChef, and Vogo respectively. The company also plans to enter the e-pharmacy segment with Myra Medicines.

Uncertainties in FY19

These services, scaling up and down of operations, foraying into new segments, are bound to have a severe impact on the company’s Financial Statements for FY19, which are just around the corner.

While its rival Uber is constantly growing in its profitability every fiscal and strengthening its core business every day, it remains to be seen how the multi-vertical aspirations of Ola affect its market share in cab hailing.

Not to forget, its cab-hailing customer base is shifting to the rival with every passing day due to the more affordable prices for better services and UI.