Cab aggregator Ola prepares for $1.5 bn IPO

Homegrown ride-hailing company Ola Cabs has hired investment banks and lawyers to start work on its plans to list on the Indian stock exchanges through an initial public offering (IPO) that could see the company raise as much as $1.5 billion, three people privy to the development told Mint.

“Ola has shortlisted Kotak Mahindra Capital and Citigroup, and conversations are on with others such as Morgan Stanley too. More banks will be added later. Two law firms have also been hired," said the first person cited above.  

 "A large part of which will be primary capital to propel the company’ future growth, while there will also be a secondary share sale by some investors. Although, these details will be firmed up only close to the filing of the draft prospectus,” the person added.

The Uber rival could file its draft IPO papers with Securities and Exchange Board of India (Sebi) as early as October, which means it could be in a position to hit the markets as early as the last quarter of FY22, the first person added.

The IPO will include Ola's mobility and cab hailing business, as well as its financial services business. Its electric vehicle business, Ola Electric will not be a part of the listing. 

The company may be targeting a float size of $1.5 billion to $2 billion and is currently figuring the specifics with bankers, said two individuals aware of the discussion. 

Questions sent to Ola, Morgan Stanley and Kotak Mahindra Capital remained unanswered till press time, while Citigroup declined to comment.

Last month, Temasek Holdings and Warburg Pincus invested a combined $500 million in ANI Technologies Pvt. Ltd which runs Ola. Bhavish Aggarwal had also participated in the round. He currently holds a 7.9% stake in the 11-year-old company, according to researcher Tracxn. 

Japan’s SoftBank is currently the largest shareholder in Ola with a 22% stake, while China’s Tencent owns 9%. 

Ola operates in more than 125 cities across India, and also has operations in the UK, Australia and New Zealand. 

In the run up to its proposed IPO, the company, in July, announced the expansion of its pool of employee stock options (ESOP) to Rs3000 crore.

The company said that it is allocating an additional Rs400 crore worth of stocks to its employees as it prepares for its initial public offering (IPO),

"A number of Indian startups were awaiting the final guidelines on direct overseas listing while prepping for India as an alternative to go public. Further, being India-centric helps these businesses to list in their home market where their customers are. Recent IPOs have shown that Indian startups can derive good valuations in Indian public markets,” partner Karan Marwah CFO Advisory, KPMG in India. 

“On the demand side, there is investor excitement at present to be a part of the growth story of these everyday consumer brands, coupled with  the lack of other credible investment alternatives in India,” added Marwah.