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Why Ola may find SoftBank’s latest Funding Proposal simply irresistible

Ola is simply not in a position to say firm ‘no’ to SoftBank’s latest funding proposal.  This is not a sensational claim, but simple commonsense determined by prevailing business realities. Before we go any further to validate our argument, it is important inform that several media reports are now claiming that existing investor SoftBank has proposed to invest nearly $1Bn in India’s homegrown cab hailing major.

According to Economic Times, Ola’s CEO Bhavish Aggarwal and SoftBank Chairman Masayoshi Son have had multiple meetings in recent weeks to sort out the investment details. These meeting though have reportedly proven to be inconclusive.

Ola's official logo

SoftBank is said to have proposed $1 Bn funding for Ola.

Nonetheless, Aggarwal will find the SoftBank’s latest funding proposal too tempting to say ‘no.’ Why?

Well, here is why. If conventional wisdom is anything to go by then Ola may find SoftBank’s $1 Bn pretty handy to fuel its international operations. As is already known that Ola has already started operations in Australia, New Zealand, U.K and is well in the process of expanding its international business further.

However, Ola doesn’t need fresh funds only for its cab-hailing business. The company is as much eager to divert significant amount of funds to its new vertical of food delivery business. In fact, if grapevines are to be believed then the cab-hailing company is so desperate to catch up with Zomato and Swiggy that it may invest a large chunk of the upcoming funds for FoodPanda.

Ola’s earnest efforts to give boost to FoodPanda’s business is understandable given that stakes at the food delivery market are pretty high. If FoodPanda manages to gain sizeable share in the market then it will offer much needed financial stability to the company. Besides, it will also help Ola is giving profitable exit to some of its existing investors.

But Ola may take a lot less than $1 Bn from SoftBank

Although Ola needs funds, it is unlikely to bargain that by giving dominant control of the company to SoftBank. Remember, SoftBank already owns 26% in the cab-hailing major and with $1 Bn funding this stake is likely to surpass beyond 40%. This will pretty much leave Ola’s board at SoftBank’s mercy. Something that Aggarwal, according to reports, doesn’t want it to happen.

Aggarwal reportedly wants to keep Ola’s controlling power intact and hence may take a lot less than $1 bn from Softbank. Economic Times claims that in order to control SoftBank’s influence, Aggarwal is in talks with investors to bring them on board in the funding round.

Now will Flipkart’s founder Sachin Bansal be part of this investment team?  This question is worth asking since media reports are buzzing about Bansal being quite serious about investing in the cab-hailing company.

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