India’s ride-hailing giant Ola had to pump near about $60 Mn over the last 15 months to ensure that it gets a nice head start in all its international markets. Regulatory filings filed with Singapore’s Accounting and Corporate Regulatory Authority disclosed these foreign investments. It must be duly noted that most of Ola’s international markets are controlled and overseen by Ola Singapore Pte – Ola’s foreign subsidiary firm.
The 60 Mn investment only reflects the cost incurred by running local operations, marketing and incentives, according to unknown sources cited by the Economic Times. The investment does not highlight expenditures incurred by investment in technology and call center operations as these critical activities are mostly being managed in India.
Last year Ola started infiltrating into international markets in a bid to boost its revenue and with an aim to be on a stronger wicket before its much anticipated IPO. The company anticipates that foreign operations alone will make for more than a third of its revenue by end of the current financial year, sources close to the company claimed. The optimism around its international operation is partly due to the fact that the burn rate incurred in the developed markets are far less than India.
Ola has also been pretty judicious in particularly choosing those international markets where currently regulatory issues are posing major headache to Uber. Strategically timing its entry when its arch rival is most vulnerable certainly makes for a wise business decision. Even several industry experts agree that if the company is successful in selecting the right international markets then its top line will surely get a good boost.
The SoftBank backed firm is being equally aggressive in chasing international opportunities. Reports claim that the company aims to increase its presence in global cities from the current 20 to 50 cities by end of 2019. However, Bhavish aggarwal’s challenge of propping up its company’s balance sheet with the help of good show in foreign markets is by no means an easy task. Uber’s grim battle to turn profitable despite its overwhelming international presence only goes on to prove the difficulties that lies in this challenge.
The success of Ola’s international gamble will ultimately rest on the dual challenge of controlling cash burn rate and increasing customer base, analysts claim.