Bengaluru: When Ola Electric Mobility Pvt. Ltd, the electric vehicle unit spun off from ride-hailing startup Ola, said in July that it had raised about $250 million from SoftBank Group Corp., it became the fastest firm to become a unicorn after Udaan, a business-to-business commerce platform. Ola Electric took just two and a half years to attain the unicorn tag, which refers to startups valued at $1 billion or more. The company had previously raised ₹400 crore in March from Tiger Global Management and Matrix Partners India, which, like SoftBank, are large minority investors in Ola’s parent ANI Technologies Pvt. Ltd.

What was remarkable about these two funding announcements at Ola Electric, apart from the soaring valuation of an entity that is yet to prove it is a viable business, was identity of the investors. As early as 2017, it had emerged that Bhavish Aggarwal, co-founder and chief executive officer (CEO) of Ola, had differences with Tiger and SoftBank, the two most powerful startup investors in the country, over a proposed sale of Ola shares between the two investors. And yet, two years later, the same investment firms had agreed to pour large amounts of capital into Aggarwal’s new startup—on his terms.

Keeping firm control

The capital infusion into Ola Electric was the latest example of how Aggarwal, who turns 34 later this month, has established firm control over ANI and all of its major subsidiaries. Typically, founders tend to exert lesser influence over their startups as they raise more capital and their personal holdings reduce. Their role also often becomes narrower as a startup grows into a size that requires a large, experienced management team.

But none of these norms seem to apply at Ola. Aggarwal has only expanded his hold over the company with successive fundraisings despite the fact that more than 80% of Ola’s holding firm is owned by foreign institutions.

Aggarwal’s dominance doesn’t seem to have bothered SoftBank and Tiger too much. The two largest minority Ola investors are betting that despite their past tussles with him, the Ola founder is that rare entrepreneur who is capable of running several businesses successfully at once.

Their stance has helped Aggarwal unlock value for ANI by spinning off a new unit, which has the potential to further enrich his shareholders and himself. At the same time, it has helped him vastly expand his control over Ola and its units.

According to a Mint examination of more than a hundred official Ola documents available with the Registrar of Companies, Aggarwal has appointed himself and his trusted subordinates and associates to the boards of ANI and its subsidiaries. He has obtained near complete control of the voting rights at ANI’s units through these means, which in turn strengthens his hold over ANI.

Aggarwal’s manoeuvrings give him far more authority at ANI and its units than his single-digit stake would normally entail. They make Ola and its subsidiaries considerably reliant on Aggarwal, which some analysts have highlighted as a matter of concern for any large company.

SoftBank and Ola declined to comment for this story.

Bhavish Aggarwal show

Essentially, Ola has five businesses: cab and auto bookings; cab leasing (Ola Fleet); electric vehicles (Ola Electric); food delivery (Foodpanda); payments and financial services (Ola Capital Services). Ola has also expanded in London, Australia and other international markets via its Singapore-incorporated entity Ola Singapore Pte. Another entity, Ola Skilling Pvt. Ltd, has been created to provide driver training and other services.

All these businesses are eventually controlled by the parent firm, ANI, which was founded by Aggarwal and his IIT Bombay classmate, Ankit Bhati, who is chief technology officer of the company.

Aggarwal has expanded his control over Ola primarily by bolstering promoters’ holdings and rights at ANI. Aggarwal’s efforts started in May 2017, when ANI first made sweeping changes in its shareholder terms, strengthening the rights of its founders and restricting those of SoftBank and others. According to the amended terms, SoftBank was barred from buying more equity shares in ANI without approval from the firm’s founders and board of directors. SoftBank, which had one representative on ANI’s board, was given the right to appoint one more director only if “such person is reasonably acceptable to the founders, and all other shareholders", according to ANI’s Articles of Association.

The Ola CEO had moved to put these and other restrictions on SoftBank after instances of investor pressure on the founders at Flipkart and Snapdeal.

That’s why in late 2017, Aggarwal blocked a proposed sale of ANI shares by Tiger to SoftBank. Aggarwal’s relationship both with Lee Fixel, former managing director of Tiger Global, and Masayoshi Son, the head of SoftBank, had cooled. By this time, SoftBank had become the largest shareholder in Ola’s arch-rival, Uber Technologies Inc., prompting speculation that the Japanese investor may pursue a merger between Ola and Uber India.

Since then Aggarwal has further strengthened his position at ANI.

Last October, Lazarus Holdings Pte Ltd, a Singapore-registered entity, acquired 6.72% of ANI, according to the Competition Commission of India. Lazarus is controlled by Ola Founders’ Trust and a unit of Temasek, a Singapore-based investment firm. In April this year, Aggarwal and Bhati increased their ownership in ANI through a rights issue, documents show. In all, the promoters directly own 11-12% in ANI, according to Tracxn, a data tracker.

Ola electric

The other way in which Aggarwal has expanded his control at Ola is by establishing dominion over Ola’s subsidiaries. Nowhere is this feature, or Aggarwal’s capacity to obtain capital on his terms, more in evidence than at Ola Electric.

The investment by Tiger, SoftBank and others into Ola Electric hasn’t been accompanied by board membership. Despite the fact that board membership for investors is a basic norm in large minority deals, on the board of Ola Electric, Matrix Partners, Tiger and SoftBank haven’t nominated representatives. However, one person familiar with the matter said that Marcelo Claure, CEO, SoftBank Group International, will soon join the board of Ola Electric.

As things stand, documents show that Ola Electric has four board members: Aggarwal, Arun Sarin, Ankit Jain and Chirag Shah, who goes by the name of Anand Shah. Sarin, the former CEO of Vodafone Group Plc, has been on the board of ANI as an independent director since 2015. Jain is a senior Ola executive who joined ANI in 2016. He moved to Ola Electric as “co-founder" in April 2019, according to his LinkedIn page. The other founder of Ola Electric is Anand Shah, who was earlier senior vice president—strategic initiatives, at ANI.

When it was incorporated in 2017, Ola Electric had different directors. Shalabh Seth—who had joined as CEO of Ola Fleet Technologies after heading SABMiller India Ltd—was on its board. So was Pranay Jivrajka, Aggarwal’s junior in college and one of Ola’s earliest employees. Seth resigned from the board in late 2017, just as he quit Ola Fleet. Jivrajka, now CEO of Ola’s food ordering unit Foodpanda, quit the board in October 2018. Around the same time, Ola Fleet appointed Ankit Bhati as a director, only for him to resign a few months later. There’s only one constant at Ola Electric as at everywhere else at Ola: Aggarwal.

Apart from Matrix, Tiger and SoftBank, Ola Electric has other well-known shareholders including: RNT Associates, the personal investment vehicle of former Tata group chairman Ratan Tata; Sarin, the former Vodafone CEO; Gaurav Deepak, co-founder of Avendus Capital, an investment bank. Two automakers, Hyundai and Kia Motors, invested $300 million in Ola earlier this year. Part of this went into Ola Electric, documents show. All these investors hold preference shares of the company.

Like at ANI, Aggarwal has enforced restrictions on the ability of shareholders in Ola Electric to sell their holdings. A share transfer requires the prior approval of the firm’s board, the Articles of Association show. Moreover, holders of preference shares are not entitled to voting rights, or “any other rights", unless their preference shares are converted into equity shares, documents show.

More than 70% of Ola Electric’s equity shares are owned by ANI, whose representatives oversee Ola Electric. These representatives appear to be nominated by Aggarwal himself. In January, the board of Ola Electric approved a stock option plan for its employees and directors, setting aside 1,457 equity shares.

Other entities

Apart from Ola Electric, Ola had considered plans to spin off Foodpanda and its payments business, both of which are also controlled tightly by Aggarwal. So far though, neither unit has taken off, an indication of the possible limits of Aggarwal’s approach of running several businesses at once.

Still, Ola is continuing to expand its financial services business by investing in a newly created entity, Ola Capital Services. Ola Capital is owned by Zipcash Card Services Pvt. Ltd, which is a subsidiary of ANI. Aggarwal and Bhati together own about 37% of Zipcash, with the rest owned by ANI. Another ANI subsidiary, Ola Fleet is the second-biggest contributor to revenues after commissions earned on cab bookings. Ola Fleet generated revenues of ₹370 crore and a loss of ₹84 crore in the year ended 31 March 2018, the latest for which numbers are available. In that year, ANI generated overall revenues of ₹2,222 crore and a loss of ₹2,842 crore.

Ola has also made strategic minority investments in scooter-sharing startup Vogo Automotive and financial technology startup Avail Finance, founded by Bhavish’s brother Ankush Aggarwal.

In conclusion

Over the past two years, sale of secondary shares at startups has become the main source of exits for venture capital firms. But partly because of Aggarwal’s enforcement of restrictions on the sale of Ola shares, the company’s investors have realized relatively lower returns than investors at many other unicorns such as Paytm and Oyo.

Since starting out in 2010, Ola has raised more than $3 billion in capital, according to Tracxn. In its latest round in May, it was valued at more than $6 billion (excluding the valuation of Ola Electric).

As mentioned earlier, the structure created by Aggarwal was driven partly by his fears that SoftBank and other investors would try and force through a merger between Ola and Uber. In 2017, when Aggarwal first made sweeping official changes to shareholder agreements at Ola, SoftBank had been involved in a boardroom battle at Snapdeal because of its insistence in selling the online marketplace to bigger rival Flipkart, a move that was opposed by the company’s founders. At the same time, Tiger Global had installed its representative, Kalyan Krishnamurthy, as the CEO of Flipkart.

Keen to avoid such scenarios, Aggarwal took pre-emptive measures to ensure that he doesn’t lose control of Ola. By now, he has turned defence into attack, establishing his dominion at Ola. Whether the company and its shareholders will benefit depends almost entirely on Aggarwal’s entrepreneurial abilities.

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