Under Pressure From Japanese Investor SoftBank, Uber And Ola Headed For Merger In India
Cab-hailing services – India-based Ola and US-based Uber’s India unit – seemed to be headed for a merger, going by Japanese investment firm SoftBank’s moves. The Japanese firm is pushing for consolidation of these two firms after Uber exited from South-East Asia selling its local company Grab. Following this deal, SoftBank will control 27.5 per cent of the stake in the combined Uber-Grab entity.
Business Standard quoting an unidentified source saying that talks are on between senior executives of Uber India and Ola with a deal being likely inked in a couple of months.
Uber chief executive officer Dara Khosrowshahi had earlier said that the company would look at any deals that can add value to its partners and shareholders, although the company believed in “controlling its own destiny in India”.
The Hindu BusinessLine, quoting sources in both companies, reported that the move behind the consolidation is spurred by increasing competition among SoftBank-backed cab aggregators, draining its resources.
Ola, which has a major share of over 60 per cent in the Indian cab-hailing services, is valued at around $5 million, while Uber India’s value is at nearly $4 million. SoftBank has a 26 per cent stake in Ola. The Japanese investment firm holds a 15 per cent stake in Uber India’s parent firm Uber Technologies.
BusinessLine quoted an Ola spokesperson as saying that the firm will focus on organic growth. Analysts say that it would make little sense for Ola to keep taking on Uber in the Indian cab-hailing market as their fight for market share is seeing them lose money. Both firms are offering discounts to customers and incentives to drivers. They have been registering losses and their merger could see customers losing some of the discounts they have been getting all these days.
Business Standard said that both companies are looking at having a controlling stake in the combined entity, a reason for the slow progress of the merger talks.