Ahead of IPO Launch, Ola Restructuring Business, Narrows Losses

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As the much talked and anticipated IPO of Ola seems to be on the cards, the domestic unicorn OLA is reportedly taking measures to restructure its business model.

The aim of this reorganization is to increase profits in order to attract investors when it eventually lists itself for an IPO in the next 18 – 24 months. Thus, OLA is serious about expanding itself and becoming a public company.

In an email addressed to employees, chief financial officer Harish Abhichandani said, “…as a business, we need to exercise sharper focus on metrics like revenue, growth, and profitability. We also need to refresh the way we run our daily operations – processes, people, productivity. Hence, a redesign of our organization and processes is the need of the hour.”

Possible Changes Under the Reorganization

The most significant change under this reorganization will be the reducing the manpower. Sources reported to ET that OLA plans on laying off 5 – 8% of its employees in the coming months. Up-to 350 jobs will be affected by this.

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Changes in OLA’s governance and compliance strategies will also be made.

OLA also seeks to increase the involvement of technology in its services and foray into related markets. For instance, OLA recently partnered up with Microsoft, with the latter investing $200 million in the Bengaluru based company. This partnership will let OLA venture into mobility and cloud-based technologies.

According to a top company executive, marketing cuts are also part of the reorganization.

In October, OLA founder Bhavish Aggarwal also got approval to increase its stake in parent company ANI technologies, making it the second time it expanded its ownership of its parent company this year.

increasing revenue and narrowing losses

OLA, which was founded in 2011, is currently valued at $6 billion. The company reportedly achieved break-even in India last year, meaning that all of its Indian operations are now profitable. Thus, profits are consistently increasing and losses decreasing.

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In 2018, OLA’s revenue increased by 61% at Rs. 2,223 crore. It also saw a 50% drop in its losses which decreased to Rs. 2,842 crore from Rs. 4,816 crore in 2017.

This upward movement has been maintained in FY19, with losses halving yet again to 1,158 crore. Revenues have reportedly risen by 16%.

Additionally, the company expanded to offer its services in international markets such as Australia, New Zealand, and the UK last year. The business is doing well in these new markets and is already being seen as a threat to Uber by experts.

It is worth mentioning that OLA has bagged various big-name investors this past year such as Microsoft, Hyundai, KIA Motors, etc., indicating a more decisive push into the motor industry.

OLA not only offer cab services, but provides food delivery, electronic vehicle services, and is seeking to venture into car rentals.

Stiff competition for Uber

OLA has proven to be a formidable competitor for Uber, which has been clocking losses this year.

Uber’s collective losses between August and December 2019 are estimated to be 3.8k crore. Out of this, Uber’s food delivery service has incurred the largest number of losses due to strong contenders like Zomato and Swiggy.

Uber’s profits and losses are especially crucial at this moment because it had its IPO earlier this year.

Uber’s value, however, seems to be shrinking all over the world. Just like OLA, Uber is undergoing a reorganization. Recognizing that it still has the potential for growth in India, Uber recently infused 1.7k crore into its Indian operations and downsized on its Indian employees by 10%.

Uber also shares a common investor with OLA – SoftBank, making things even more treacherous for the two competitors.

However, where prospects look favourable for OLA, there’s more uncertainty about where Uber is headed.

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