India's Transport Unicorn Takes on Uber

India's largest ride-hailing startup, Ola, is in talks to raise $600 million. The capital infusion will be used to hire more drivers and counter their biggest rival, Uber Techologies Inc., which is making aggressive inroads into the country after being pushed out of China, according to a story in Bloomberg.

Currently, Ola is valued at $5 billion while Uber is at $69 billion. The prize is India's $10 billion car services market.

Uber's China Retreat

Ola might appear outgunned against a giant like Uber. But size doesn't guarantee success. Just look at Uber in China. After losing $2 billion on the mainland and waging an expensive price war with Didi Chuxing, Uber conceded defeat. It sold its China operations to Didi Chuxing in a deal worth $35 billion. The rationale for Uber's exit was that it would pave the way for the company to concentrate its efforts on launching an IPO while focusing attention on more profitable markets. (See also, Uber to Sell Chinese Business to Didi Chuxing.)

Ola's Rich Funding

But Uber may face a well-financed rival in India. Ola thus far has raised a total of $1.23 billion since it was founded in 2010, according to Crunchbase. In the latest funding round, Ola seeks to raise enough capital for at least 18 months and may receive support from Softbank Group Corp., an existing funder, which might lead the money-raising effort, a source told Bloomberg. Ola's previous backers include Tiger Global Management, DST Global, Accel Partners and Sequoia Capital. It's unclear whether they will participate in this funding round. Indian company ANI Technologies Pvt. Ltd. is Ola's owner.

Ola's Strategy

New funding won't stop Uber's incursion onto Ola's turf, but it could slow the American company's growth by allowing Ola to add more drivers and expand its geographic base across the vast continent of India, the world's second most populous nation just behind China.

And Ola's footprint in India is far bigger than Uber, at least for now. It operates in 102 cities compared to 28 for Uber, and its 450,000 vehicles at its disposal are much bigger than its American rival. Ola offers additional features that are key to succeeding the India market. It allows customers to book rides off-line, which is helping it to expand sales in a poor nation with sporadic Wi-F service, Bloomberg says. (See also, The Top Emerging Companies in India).