From $2.5 billion to $4.5 billion: Ola is on course to double its valuation in less than 6 months

Just three months after taxi-hailing app Ola raised $400 million, the company is in advanced stages to raise another $500 million which could value Bangalore-based firm at a whopping $4.5 billion.

In April 2015, Ola became India's third most valued company startup after its funding round that generated $400 m and valued the company at $2.5 billion. Ola raised the money from new investors such as Moscow-based investment firm DST Global, Singapore sovereign-wealth fund GIC and New York-based hedge fund Falcon Capital Edge LP while existing investors such as Japan’s SoftBank,  based Tiger Global Management, Hong Kong’s Steadview Capital and US-based Accel Partners also participated in the funding round. Local e-commerce giants Flipkart and Snapdeal, which are also backed by venture capitalists across the world, are the only Indian companies currently valued above Ola.

According to a report in Economic Times, the latest funding round is likely to be finalised in two-three works and will help Ola burn more cash if it needs to retain its leadership position in India. In the last one month alone, Ola has been running a campaign offering Rs 50 off on its rides while TaxiForSure, the other taxi-hailing app Ola acquired in 2014 has slashed its rates.

 From Ola cabs. Agency.5 billion to .5 billion: Ola is on course to double its valuation in less than 6 months

Ola cabs. Agency

In fact in a bid to emerge as a complete urban transport solution provider, Ola is even preparing to start shuttle bus services in the next two months and is aggregating tourist and chartered buses for the same. The Ola Bus will also be integrated in the same app from which people choose between autos and cabs. It has even diversified its business by venturing into several new categories including food and grocery delivery. The company is currently working on several new initiatives, including carpooling, ecommerce on-demand deliveries and logistics.

The five-year-old company — founded by IIT-Bombay graduates Aggarwal and Ankit Bhati — is estimated to clock a revenue run rate of around $450-500 million, and is aiming for gross revenue of $1 billion by the end of 2015, said another Economic Times report.

In July, Ola roped in former Vodafone Global chief executive officer Arun Sarin as an independent director, the second top Indian business leader to back the Bengaluru start-up, a week after Tata Sons chairman emeritus Ratan Tata invested in the company. The backing of two of India’s most prominent business leaders would help Ola get strategic advice to battle rival Uber in the country.

Ola has presence in 100 cities with about 200,000 vehicles while Uber  has presence in 18 cities in the country. Although Uber is  much smaller than Ola in India, it is the second-most valuable startup in the world at $41 billion after Chinese handset maker Xiaomi and has expressed its commitment to stay the course in India. But such aggressive expansion plans bring us back to the most basic of questions: Are such valuations justified?

Both Ola and Uber are burning cash, raising mega rounds of funding and acquiring customers at the expense of profits. The $500 million will just add to Ola's  war-chest and allow them to aggressively expand into other cities and diversify. Now we just have to wait and see how Uber responds.

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Updated Date: Jul 28, 2015 13:04:18 IST