Homegrown cab aggregator Ola has been able to scale up its revenues quite comfortably but it’s losses are disproportionately high. Against a revenue of around Rs 1,178 crore for the financial year ending March 31 2017, the loss recorded by Ola amounted to Rs 4,898 crore, which is 4 times the revenue.
And you have to take into account that when these figures are compared with those for the previous year, while the revenue has doubled, from around Rs 500 crore, the losses have seen an increase of around Rs 1,700 crore from a level of around Rs 3,150 crore.
There cannot be any other explanation for this situation but the heavy subsidizing of the operations in order to stay in the business in the face of tough competition, particularly from the US major Uber.
The worrying thing for the observers in the market is that Ola’s auditors had got it all wrong in their assessment of the expected results for the company, ANI Technologies Pvt. Ltd., which owns and runs Ola. The estimate of Ola’s loss, by the audit firm, was far lower at around Rs 3,000 crore against what turned out later to be close to Rs 5,000 crore.
The prediction by the same auditors that Ola will actually turn profitable and notch up as much as Rs 6,000 crore in profit by the year 2021, will now have to be looked at with some skepticism. The overall trend in the case of the standalone operations and the own fleet operations also indicate the same pattern; jump in revenues, but steeper climb in losses.
Ola has never had difficulty in raising funds; the cab aggregator has received $2 billion and its valuation when last done was over $4 billion. Tencent Holdings and SoftBank are major investors in Ola and there are reports that the company is still looking to raise another $1 billion.