Ola Fleet Technologies Pvt. Ltd, the cab-leasing arm of taxi aggregator Ola, has secured a term loan of Rs 1,000 crore ($156.3 million) from Yes Bank to finance the purchase of commercial vehicles.
According to the company’s July filings with the Ministry of Corporate Affairs, Ola Fleet has secured the loan through a hypothecation deed agreement with the bank on 21 March. As a part of the agreement, the vehicles purchased by Ola will remain as collateral, besides the spares and consumables.
The loan is for a period of 48-60 months, and will be based on lease agreements between Ola and its partner drivers. Ola Fleet is eligible to avail this facility till November 30 2017, after which Yes Bank will take a decision on extending the facility on December 4, the documents reveal.
According to earlier filings, Ola Fleet had also secured a loan of Rs 250 crore from Yes Bank in 2016. Besides, it has taken loans of Rs 300 crore from Axis bank, Rs 200 crore from HDFC Bank and Rs 100 crore from ICICI Bank over the past one year.
In 2015, Ola had launched its leasing business, wherein its partner drivers would have to make an initial deposit and then pay monthly instalments for a period of three to five years, depending on the make and model, before they could own the vehicle.
Earlier this year, Ola had appointed former managing director at SABMiller India, Shalabh Seth, as the CEO of Ola Fleet Technologies.
In July, the company had received Rs 100 crore from its parent ANI Technologies Pvt. Ltd, which operates Ola.
For 2015-16, Ola Fleet had posted losses of Rs 13.3 crore, against a profit of Rs 3.9 crore in the previous fiscal year, documents with the Registrar of Companies reveal. Its net sales had, however, tripled from Rs 1.8 crore to Rs 5.6 crore during the period under consideration, while its total expenses had gone up from Rs 8.1 crore to Rs 11.7 crore.
The development comes at a time when the cab leasing business of both Ola and Uber are facing a series of setbacks in the form of driver exits and defaulting of car loan EMIs over dwindling driver incomes.
In May, The Economic Times had reported that the State Bank of India had suspended car loans for Uber and Ola taxis, after non-payment of dues by drivers resulted in loan defaults of about Rs 120 crore. The bank had also seized 300 cars owned by both companies.
Out of the Rs 120 crore, the exposure to drivers affiliated with Ola alone amounted to Rs 60 crore, with a default of Rs 16 crore. The report had said that Axis Bank had also stopped lending to Uber.
The roll out of Goods and Services Tax, wherein the tax rate for commercial vehicles rose from 14.5% to 29-43% will only add to the woes of the leasing business of both firms. It is also not clear how many vehicles were purchased by Ola using the term loan facilities, and how many of them are plying on the roads.
A detailed e-mail query to Ola seeking more information did not elicit any response till the time of filing this report.
An earlier Reuters report had said that Uber was reviewing its cab-leasing programme, following large scale returns of leased cars by drivers, who quit over falling incomes and incentives. Uber operates its cab leasing business under Xchange Leasing India Pvt. Ltd.
Both Ola and Uber had started off with an asset-light model, but launched their respective cab leasing programmes to gain more control over the driver partners and restrain them from migrating to rival companies. However, it appears that both Ola and Uber did not anticipate the impact of reduced incentives and earnings. Large-scale driver exits have now put both the leasing businesses in a limbo.