(Bloomberg) -- Ola scored $2 billion in new funding from a group of investors including SoftBank Group Corp. and Tencent Holdings Ltd., a person familiar with the matter said, helping bankroll Uber Technologies Inc.’s fiercest rival in India.
Other backers in the ride-hailing startup’s latest financing round included a venture capital fund jointly run by Indian industrialist Ratan Tata and the University of California’s investment arm, as well as several U.S. institutional investors, people familiar with the deal said, asking not to be identified talking about a private deal. The company’s valuation after the financing wasn’t immediately clear.
The deal will help Ola shore up its lead in India and build its supply of vehicles and drivers as well as technology to help it win against Uber, one of the people said. The funding round isn’t finished yet and the amount could change, the person added.
Uber and Ola, whose parent is ANI Technologies Pvt., are competing in one of the world’s most attractive ride-hailing arenas. Ola currently holds the upper hand in the $10 billion Indian market but Uber has been increasing the pressure, via driver incentives and promotions targeted at its rival’s existing markets. The San Francisco-based company is ratcheting up spending in emerging markets after ceding China to rival Didi Chuxing, though boardroom squabbles and a London ban now threaten to side-track management.
The funding will allow Ola to try and fix driver shortages in lower-tier cities. That in turn may prompt its arch-foe to respond, shifting the battle toward resolving fundamental issues rather than a discounting war, said Anil Kumar, chief executive officer of Bangalore-based RedSeer Consulting Pvt.
“The cash coming into Ola’s bank is going to affect the competitive strategies of both Ola and Uber, and both will be able to move from short-term price war games to a long-term sustainable business model,” Kumar said. Fixing vehicle shortages also builds Ola’s business outside of major metropolitan areas. “Ola has been growing in the top seven or eight cities but are in over a 100 cities and a lot more needs to be done. SoftBank will want the market to grow both in size and momentum so Ola will need to rev up in other cities.”
Ola didn’t respond to a request for comment. A spokeswoman for SoftBank declined to comment.
Ola has received other financing but the latest cash influx marks the second-largest funding round in an Indian startup, after Flipkart Online Services Pvt., the country’s largest online retailer. The SoftBank Vision Fund and Tencent also invested a total of about $4 billion in Flipkart this year as it vies with Amazon.com Inc., people familiar with the matter have said.
The Ola round, which is nearing completion, already has participation from one of SoftBank’s investment arms, SIMI Holdings Inc. It wasn’t immediately clear if SoftBank’s $93 billion Vision Fund would participate. SoftBank is also considering a multibillion-dollar investment in Uber. Ola’s previous investors include Tiger Global Management, DST Global, Accel and Sequoia Capital.
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