Ola, India’s largest taxi aggregator has now bought smaller rival TaxiForSure for Rs 1,237 crore ($200 million) in a cash-and-stock deal. This certainly sets the stage on fire pertaining to greater competition between the SoftBank backed Bengaluru-based firm and its San Francisco-headquartered rival Uber. The deal should significantly increase Ola’s position as the widest-reaching taxi app service in India, although both services will operate under their own brands.
As per claims made by Ola, it currently has 100,000 vehicles offering services across 67 cities in the country, and with the acquisition, TaxiForSure’s 15,000 vehicles across 47 cities will also be added. Talking of the competition, Uber operates in 11 cities in India, where it offers mainly higher-priced, premium-marketed rides along with a budget ‘Go’ service.
Regarding changes in the management, the companies confirmed today that TaxiForSure’s co-founders Aprameya Radhakrishna and Raghunandan G will help as advisors for a little while and their tenure may be brief. Both had set up TaxiForSure in 2011 and owned about 5.5% of the company each. They have now been paid a cash compensation of about Rs 136 crore in addition to some Ola stock, said sources aware of the negotiations. However, TaxiForSure’s 1,700 staff will stay with the company. Arvind Singhal will be elevated from the position of COO to CEO.
“There’s a lot of complementary value in the strategy TaxiForSure has followed. I’m very excited to welcome the TaxiForSure team onboard and look forward to working with them towards realizing our common vision,” said Ola CEO Bhavish Aggarwal in a statement. Aggarwal founded Ola with Ankit Bhatti.
“TaxiForSure as a brand can now focus on further developing its offering to operators and customers and save resources on funding efforts and fighting competition,” said Bhavish adding that “for customers, drivers and operators on the TaxiForSure platform, nothing will change.”
“We feel we should ride the original bet and Ola is backed by a strong set of investors,” said Karthik Reddy of Blume Ventures, who was among the first venture funds to back TaxiForSure. “The deal sets a template for players who realize that many startups in the same space cannot survive and have to aggregate to compete,” added Reddy.
TaxiForSure which was backed by Accel Partners and Helion Venture, was competing with larger rivals Ola and Uber until September 2014, in fast-growing taxi aggregation market. Both Ola and Uber had made offers to buy TaxiForSure and the company itself made a last-minute attempt to raise about $60 million of fresh funding.
Experts are of the opinion that TaxiForSure had to sell out largely due to shortage of working capital. People in the know told while Uber offered a predominantly cash-based deal, investors preferred the promise of further growth that Ola stock offered. Last month, China’s top two taxi-hailing companies — Didi Dache and Kuaidi Dache announced a merger. They too will operate as separate entities.