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Ola’s cab-leasing arm swings to a loss in FY16

21 April, 2017

Ola Fleet Technologies Pvt. Ltd, the cab-leasing arm of taxi aggregator Ola, has posted a loss of Rs 13.3 crore for FY16 compared to a profit of Rs 3.9 crore the previous year, show filings with the Registrar of Companies (RoC).

Net sales, however, tripled from Rs 1.8 crore in FY15 to Rs 5.6 crore in FY16. Total expenditure went up from Rs 8.1 crore to Rs 11.7 crore.

Email queries sent by VCCircle to an Ola spokesperson did not elicit a response at the time of publishing this report.

Last month, as per documents filed with the RoC, ANI Technologies Pvt. Ltd-run Ola pumped Rs 50 crore into the leasing subsidiary. Initially, when the leasing arm was set up in 2015, the cab-hailing company had said it would invest Rs 5,000 crore into it over a year.

In September last year, Mint had reported that the company was trying to lure drivers with a lower upfront payment, zero commissions and new car models. The report also said, citing anonymous sources, that “slower-than-expected growth of the business has prompted Ola to make changes to its leasing business.”

Apart from lowering the upfront payment and forgoing commissions, it had also increased the lease tenure by six months to 48 months, to keep drivers on its platform for a longer period, the report added.

However, analysts feel it is too early to say that the business has come a cropper, and its long-term logic is intact.

Sanchit Vir Gogia, chief analyst at Greyhound Research, said, “This is a relatively new business. It takes time to revive it, because it is capital-heavy. It will take at least 4-5 financial years for something [profitable] to come out of this business. We shouldn’t hit the panic button as of now.”

Rutvik Doshi, director at Inventus Capital Partners, echoes Gogia’s views.

“It [loss] is part of the game. Ola has a big pool of drivers. And there are drivers who cannot buy cars on their own. From a strategic point of view, it makes sense in getting into this business,” Doshi said.

Early this year, Ola appointed Shalabh Seth as chief executive of Ola Fleet Technologies. Prior to joining Ola Fleet, Seth was serving as managing director at SABMiller India.

Ola’s cab-aggregation service is present in 102 cities in India, and users can book cabs and auto-rickshaws using its app.

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Ola’s cab-leasing arm swings to a loss in FY16

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