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Hyundai in talks to pick up 4% stake in Ola for $250m

Mar 8, 2019 | Emerging Trends, India

BENGALURU: Korean auto giant Hyundai wants a slice of the lucrative Indian car-sharing business and may invest as much as $250 million in ride-hailing major Ola. The move would push up the valuation of the company to over $6 billion, according to three sources familiar with the development.

The transaction, which is in advanced stages of discussion, will be the first significant investment by a top auto company in one of India’s most important ride-hailing service. There have been instances of auto majors picking up stake in smaller shared-mobility companies, such as Mahindra and Ford’s investments in self-ride company Zoomcar.

“The finer details and investment size are still being finalised,” said one of the sources mentioned earlier. The deal may close in the next few weeks, giving the South Korean auto major about a 4% stake.

The investment will come as part of the ongoing funding round at Ola, which is looking to raise over $400-500 million. Investors like Flipkart co-founder Sachin Bansal and Hong Kong-based hedge fund Steadview Capital have already committed capital as part of this round. Mirae Asset-Naver Asia Growth Fund is also in talks to participate in this round by investing $30-40 million, said one of the sources mentioned earlier.

“Hyundai Motor is open to cooperation with various potential partners, but it is our policy not to comment on market speculation and rumours,” said a Hyundai Motors India spokesperson, while Ola did not reply to queries till the time of going to press. Online portal Entrackr first reported the transaction.

If it goes through, the deal will help Hyundai push its vehicles — including electric car Kona EV, which will be launched soon — to the leasing unit Ola Fleet Technologies. Hyundai also has plans to electrify some of its existing vehicles, including mini cars such as Grand i10. According to industry analysts, 7-8 lakh cars are on platforms like Ola and Uber. Over the past few years, 75,000-1,00,000 cars were leased by drivers and companies in a year, but that growth has slowed down recently as they increase focus on additional forms of transportation like autos.

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However, a transaction is not likely to result in an exclusive arrangement as companies like Southeast ride-hailing major Grab have raised money from many automakers, including Toyota and Hyundai.

“A lot of car sales are going down because the shared economy is going up. While there will be growth in Ola, Uber or a Lyft, the reality is they (auto companies) still need to grow their sales. So car sales are moving from business to consumer (B2C) to business to business (B2B). They are putting it (investment in cab-aggregators) to have more preferred access to this market because growth is going to come from there,” said Ankur Pahwa, partner and national leader (e-commerce & consumer internet), EY India. He added that automakers could also leverage the driver data to bring improved car models for their consumer business.

The action on shared mobility business has also been there in the two-wheeler space. The Munjal family that controls the country’s largest two-wheeler company Hero Moto recently invested in scooter-sharing company Vogue.

Article Source : Times of India

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