Olacabs is on the brink of closing the deal to buy out rival TaxiForSure for about $200 million (₹1,250 crore), in its bid to take on arch-rival Uber and gain a dominant position in India's taxi aggregation market.
The deal is expected to be funded by a combination of cash and stock. Sources directly involved with the negotiations confirm the signing of the term sheet with the finer details of the deal to be finalized over the next 10 days.
The deal is expected to help Ola take on Uber, the $40 billion taxi-app company, while also allowing for lower cost of operations.
Olacabs was started by Bhavish Aggarwal and Ankit Bhati of IIT-Bombay. The company received $210 million in funding from SoftBank of Japan in October 2014.
International taxi aggregators are in talks to take on the might of Uber. The move could see regional players like Singapore's GrabTaxi, India's Ola and San Francisco-based Flywheel come together.
TaxiForSure was started by IIM-Ahmedabad graduates Raghunandan G and Aprameya Radhakrishna about four years ago. The company had spent the last two months looking for funding in order to stay relevant with the bigger players. They raised a bridge round worth $20 million from its existing investors, valuing the company at $125 million. TaxiForSure spoke to Uber, Meru and Carzonrent for a possible sellout, with Ola managing to clinch the deal.
The move marked the growing maturity of Indian entrepreneurial space with smaller players consolidating to take on the larger players, allowing the creation of new start-ups with new business models and better products, Vivek Wadhwa, a fellow at Stanford Law School and a director of research at Duke University told The EconomicTimes.
Radio Taxi Licence
Cab-hailing apps -- TaxiForSure, Uber and Ola -- do not own the cabs, but only provide the technology platform which links the taxi owners and prospective customers, and hence stake a claim to be regarded as technology company.
The rape of a female passenger by a driver with Uber forced the Delhi Transport Authority to ban Uber, and insisted all such companies apply for radio taxi licence.
The Delhi Transport Authority rejected the licence application submitted by Ola, Uber NTL Call Cabs and TaxiForSure finding them 'deficient'. The Authority regulates the taxi market for the capital region and sends out notices pointing to the gaps. A government official said it would take at least 10 days for the taxi companies to re-present the applications.
The report says Ola to have maximum number deficiencies and TaxiForSure to have only one.
The acquisition indicates that companies are willing to go the whole length to survive regulatory scrutiny and supervision. The $10 billion car rental market has a miniscule participation from the organised taxi industry, repoted FirstPost.