Ola wants government to stop 'capital dumping' by rivals

Though heavily funded by foreign investors like Japanese SoftBank Group, leading cab aggregator Ola has said government should bring in regulations to stop "capital dumping" which is distorting the market.

"There is an urgent need for adequate regulation to curb predatory pricing and capital dumping in the ecosystem in the interest of co-existence of all players in the ecosystem," Ola's Chief Operating Officer Pranay Jivrajka told PTI over phone from Bengaluru.

While he did not name the company's deep-pocketed arch-rival Uber, he said foreign capital should not be used only to offer disruptive pricing.

The comments are interesting as Ola has secured foreign capital worth over USD 1.2 billion from investors like SoftBank, DST Global, Accel Partners and Sequoia Capital, among other players. It is scouting for another round of funding from the Japanese company and others.

Ola's previous fund-raising of USD 500 million last November was also from SoftBank.

Media reports said Ola, the third most valuable startup in the country, is looking at raising around USD 600 million in this round.

Asked about this, Jivrajka said the company is adequately capitalised now and that as a policy, it does not comment on market speculation.

He evaded a direct answer when pointed out that his own company is almost fully funded by foreign capital, saying capital should not be used just to offer disruptive pricing.

"Capital should be used for sustainability," he added.

On predatory pricing, he said Ola's prices on an average are 20 per cent higher than Uber's and in almost all cities where the American firm is not present, the Bengaluru-based startup's operations are profitable.

Broadly welcoming the recently released Maharashtra City Taxi Rules of 2016, Jivrajka said the policy is forward-looking, comprehensive and inclusive in nature.

"We made three recommendations to Maharashtra. The most important is the need for a review of the proposed high licence/permit fee of Rs 2.61 lakh for vehicles of 1,400-cc and above as this is bound to fall heavy on drivers as they never factored in this while taking their loan and will add over 30 per cent capital burden for them," he said.

He said this high cost of permit is not there in any other state.

Karnataka, Delhi, Kerala and Chandigrah have come out with regulations for cab aggregators but none of them have such high permit fees, he added.

Jivrajka said this high entry cost will be deterrent to entrepreneurs and would eventually make rides costlier for customers.