India's largest taxi aggregator Ola has bought smaller rival TaxiForSure for Rs.1,237 crore ($200 million) in a cash-and-stock deal that sets the stage for greater competition between the SoftBank backed Bengaluru-based firm and its San Francisco-headquartered rival Uber in the fast-growing market for app-based taxi services.
The deal values the four-year-old Ola, which was founded by two IIT Bombay alumni, at Rs.8,700 crore ($1.4 billion). It was stitched together by investors in the two companies and includes a cash payout for the two co-founders of TaxiForSure. TFS shareholders would get one Ola share for seven TFS shares.
The acquisition for $200 million, will rank as the second-largest deal in the Indian start-up sector. The largest deal in the sector was Flipkart's purchase of fashion portal Myntra last year. TaxiForSure, which will continue to function as an independent entity even after the acquisition, will be run by Arvind Singhal who will be elevated from the post of chief operating officer to chief executive officer, while its two co-founders -Aprameya Radhakrishna and Raghunandan G -will take on an advisory role that is expected to last for about six months.
The two IIM-Bangalore graduates, who set up TaxiForSure in 2011, 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.
Until September 2014, TaxiForSure, backed by Accel Partners and Helion Venture, was competing gamely with larger rivals Ola and Uber in India's fast-growing taxi aggregation market.But in October, when SoftBank led a $210-million funding round in Ola, TFS was under pressure to raise more cash to stay in the game.
Weeks later, the alleged rape of a passenger by a driver on the Uber network triggered a spate of regulatory scrutiny on the sector, making it difficult for TaxiForSure to convince investors to back the smaller player in a volatile market.
Experts are of the view that TaxiForSure had to sell out due to shortage of working capital. Both Ola and Uber offered to buy out TaxiForSure, even as the company made a last-minute attempt to raise about $60 million of fresh funding.
Industry watchers, however, are not convinced that Ola has won the battle in the Indian market, despite leading with a network of over 40,000 drivers compared with Uber's 10,000.
The deal values the four-year-old Ola, which was founded by two IIT Bombay alumni, at Rs.8,700 crore ($1.4 billion). It was stitched together by investors in the two companies and includes a cash payout for the two co-founders of TaxiForSure. TFS shareholders would get one Ola share for seven TFS shares.
The acquisition for $200 million, will rank as the second-largest deal in the Indian start-up sector. The largest deal in the sector was Flipkart's purchase of fashion portal Myntra last year. TaxiForSure, which will continue to function as an independent entity even after the acquisition, will be run by Arvind Singhal who will be elevated from the post of chief operating officer to chief executive officer, while its two co-founders -Aprameya Radhakrishna and Raghunandan G -will take on an advisory role that is expected to last for about six months.
The two IIM-Bangalore graduates, who set up TaxiForSure in 2011, 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.
Until September 2014, TaxiForSure, backed by Accel Partners and Helion Venture, was competing gamely with larger rivals Ola and Uber in India's fast-growing taxi aggregation market.But in October, when SoftBank led a $210-million funding round in Ola, TFS was under pressure to raise more cash to stay in the game.
Weeks later, the alleged rape of a passenger by a driver on the Uber network triggered a spate of regulatory scrutiny on the sector, making it difficult for TaxiForSure to convince investors to back the smaller player in a volatile market.
Experts are of the view that TaxiForSure had to sell out due to shortage of working capital. Both Ola and Uber offered to buy out TaxiForSure, even as the company made a last-minute attempt to raise about $60 million of fresh funding.
Industry watchers, however, are not convinced that Ola has won the battle in the Indian market, despite leading with a network of over 40,000 drivers compared with Uber's 10,000.
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