Ola has probably dropped off biggest ever hint that it may soon achieve the elusive milestone of becoming a profitable company. India’s largest cab hailing company on Thursday said that it has finally started making profit on each cab ride. This profitability on each ride has been achieved after taking into account expenses like driver incentives and discounts, according to the company.
Ola’s big leap towards profitability comes even as its main rival Uber is yet to announce any good news on profitability front. While this will surely offer huge competitive boost to Ola, it will also offer strong push to India’s home grown cab hailing company to go for an IPO in coming years.
However, Ola’s road to become a genuinely profitable company is still a long drawn one. The Bengaluru headquartered startup cannot turn into a profitable company unless it recovers expenses for salaries and technology, according to sources familiar with the matter. But sources add that Ola is confident of finding a way to recover these expenses and turn into a truly profitable company by the year end.
Ola’s CEO Bhavish Aggarwal recently dashed out an email to employees to announce about company’s latest milestone.
“Last week, our India business crossed a major milestone. We are now ENTR positive,” Aggarwal wrote in the mail. “This milestone has come after a consistent and persistent effort that all of you contributed in, and we’ve been able to achieve it keeping market share and growth steady,” he added.
An important metric in the cab hailing industry, ENTR calculates the commission that cab-hailing companies charges from drivers after taking into account all the expenses including discounts.
Meanwhile, several industry analysts are still not convinced about Ola’s claim that it will become a profitable company by year end or any time soon. The argument put forth by most analysts is that by merely posting good numbers for specific period does not turn a company into profitable company for the entire financial year.
Most Industry experts certainly believe that unless Ola is able to find a business model that consistently generates profit, profitability will continue to remain as elusive as it has been in the past. But there at least seems to be unanimous agreement that Ola has been able to understand Indian consumers far better than Uber.
According to Ola’s latest filing with Ministry of Corporate Affairs, the company’s operating loss zoomed by 32% to Rs 3,731 crore in FY17, while operating revenue more than doubled to Rs 1,178 crore.
