Cab-sharing service Ola will go public withing the next three to four years, said CEO Bhavish Aggarwal. The business was on track for the IPO and would go cash-positive "very soon," he added.
When asked if the IPO push was due to shareholders such as SoftBank and Temasek, Aggarwal said while the shareholders had a voice on the table, the company would take into account the opinions of all shareholders of Ola.
"Our focus has been to create a very impactful large business out of India, build a long-term stakeholder value not just shareholder value," he added.
Watch here: Ola targets IPO in three to four years
Q: Ola started in 2011, now with 110 plus cities, is it 111?
A: 110 in India and 10 in Australia now.
Q: I think it is about 1 million driver partners or is it more by the time I came to the room?
A: We have about a million driver partners on our platform, 110 cities. We started the business in 2010 December, me and my co-founder Ankit and those days I remember when I went up to my dad – I was just two years out of college back then, 2008 is when I finished my undergrad studies from IIT-Bombay and two years I worked here in Bangalore at Microsoft and I started – when I went to my dad with this idea, he said, “beta tum travel agency khol rahe ho?” I was like, “Nahi dad, this is something more high-tech.” he couldn’t understand it. My parents are doctors in Ludhiana.
Since the start, which was very organic, very bottoms-up between me and my co-founder, we had about Rs 2 lakh which we invested in the business and it felt like investing your life savings. But from there to today it has been a very exciting journey.
Q: Let me begin with that then since you said money, this is CNBC-TV18, so we also start and end with money every day. We believe you are making profit on every ride. So is Ola finally profitable today?
A: We are operationally profitable in our India business. So Ola India makes money on every ride. Our focus over the past couple of years has been to keep growing the market, keep growing our share in the market and build a more sustainable business as we go along. We have been steadfast in that focus. It has led us to this place where our profit is – we are operationally profitable. Very soon, we will be cash flow positive and we will continue to be on this focus. In the India market, which I believe many internet companies don’t fully appreciate especially the ones who are not Indian, if you give consumers a lot of free things, they will take it.
But the focus has to be to build a long-term sustainable business model and that is the place where we are focused a lot. We understand the Indian consumers are very deeply, the consumers who value – consumers are not price conscious in India, consumers are value conscious. And if you can provide that value, they will be willing to pay a little extra delta for that. That is what we believe we have been able to do.
Q: What everyone would want to know and I am sure ICICI wants to know when are you coming to the market? One of the few unicorns in India that perhaps will make it to the market. Do we see it in 2018?
A: I will start with a small story there. When I started Ola, my parents said, “tum to travel agency khol rahe ho,” and my grandfather who used to be alive back then told me, “beta jab tum company public leke jaaoge na, tab me tumhara stock kharidunga.” Now he is no longer there, it has been eight years since we started the company but the ambition for both me and Ankit has always been to build a sustainable, long-term, independent institution.
To that direction, we are definitely going to IPO, our goal is to aim for an IPO in about three-four years. We are on that track. Our focus on building a sustainable business model, building a profitable business, builds into that ambition. Yes, I believe the timeframe would be about three-four years.
Q: Why would it be three-four years? Is it because SoftBank told you that, Temasek told you that? If you are profitable, it is time to go public, isn’t it?
A: We are probably the few large internet companies in India, which are independent. So SoftBank is a shareholder. They have a voice on the table but that is only one voice. In the end, we do what the entire group of shareholders and stakeholders jointly feel is valuable and in the end, what is valuable to us is what will create value for India and society. So our focus has been to create a very impactful large business out of India, build a long-term stakeholder value not just shareholder value. So our consumer should see value in us, our driver partners should see long-term value, they should see growth in their careers grow from one car to two cars to three cars and eventually we should have a story where the average Indian citizen can also have part of the value creation. So an IPO is a core part of our story.
Q: You spoke about this, Walmart buying Flipkart and increasingly a lot of Indian businesses are getting bought over by global businesses and even in your case SoftBank owns both Uber and Ola, so do you think you will remain an India and an independent internet company or is it going the Flipkart way and you cannot stop it?
A: Like I said, our focus has been to build a sustainable large scale business and we have already gotten there. So we are not dependent on external capital.
Q: But if you were shown money that you cannot refuse, I guess that is what Flipkart was shown?
A: So far nobody has made me an offer I cannot refuse.
Q: Then you are open to the idea when that offer is made?
A: If you look at long-term – in our industry or in any industry if you ask suppliers, customers, everybody values competition and competition makes you stronger.
So we don’t fear competition at all. In the past three years since competition got very intense in our category, I remember three years ago, people had pretty much written us off that there will be a lot of money thrown at this industry and the local company will get bought over.
It ended up quite the opposite where we have a much stronger business, we have a strong market position and we are now getting to a place where we can list the company.
So competition makes you stronger and we genuinely believe everybody needs choice and people will continue to want companies in a particular industry to fight with each other, keep improving their own services because the consumer expectations don’t remain standard, consumer only keeps wanting more. So the company, which can do better in delivering for tomorrow will continue to win for tomorrow.
Q: Consumer wants to own the share. Look at the number of people who have become rich in America because they own the FAANG stocks, an Amazon or a Facebook. Give us a chance in India, why wait for three-four years because I am sure there will be many people who will give you money that you cannot refuse and the Indian shareholder will get excluded. That is why I am asking. If you have to wait three-four years, somebody might come and swallow Ola away and keep it as a private property. Therefore, why three-four years, won’t it be one-year, two-years?
A: This industry is still very early in its evolution both in India and globally.
Q: 110 cities and why are you calling it, what is left in India?
A: Let me talk a little bit about the opportunity that we are going after. Our opportunity was never a taxi company, we were never thought of ourselves as a taxi or a ride sharing company. Our mission is to build mobility for a billion people and mobility is a core part of everyday life.
If you look at wallet spends for the average citizen, a large part – in fact, the largest part outside of your home rent goes into mobility, you buy a car, you pay for fuel, your kids go to school on a school bus, an average middle class family in Indian owns one car, so the other working spouse will go in a bus or public transport. So mobility is a large spend, yet mobility has never been thought through from a consumer lens.
The average middle class family will think of buying a car but the modern technology and modern business models enable you to offer mobility as a service. I don’t own a car and I use a service whenever I need to. I can choose what type of service I want and in this broad paradigm of mobility as a service, the whole world is getting started. Even in the West, this whole industry is getting started.
To give an analogy, if you look at how the e-commerce world evolve, it has started off 25-30 years ago when the internet started and even today e-commerce sales are a small fraction of overall retail sales even in the West. Our industry started off four-five years ago. So there is a lot of work to be done, the world of the future as far as your mobility needs are concerned will be very different from the world of today. Whether people own a car or not, what kind of services they use, how they travel, even in India and outside India, there is a lot of innovation to be done. So a lot of work needs to be done and we want to do that work.
Q: The competition commission is a little worried that SoftBank owns both you and Uber and it will be very easy for you all to get together and none of us will know about it. So how do you prove to the competition commission that there are Chinese walls?
A: From our perspective, we believe in competition. We believe competition is good for every stakeholder in the market. So we believe completion is good, it has strengthened us as a company, it has strengthened the market and I don’t see any reason competition will not exist. In fact, this industry is probably one of the most competitive industries in our country across any industry.
That said, we truly respect all regulatory authorities, in fact, we have a very collaborative approach with regulatory authorities be it in India or even outside India as we have gone in there, our collaborative partnership approach has actually helped us open lot more doors. So whatever we need to do to make sure competition sustains in our industry, we will do. We will ensure we are aggressive in the market, we continue to innovate for the consumers and the drivers, we continue to grow the market aggressively and whatever comfort regulatory authorities would want, we would make sure proactively we build on those.
So from our perspective when I speak for the entire company and all our shareholders who are very supportive, we will make sure, whatever compliances need to be done, are done.
Q: What made you think of this? Did you do a math that if I own a car I will spending Rs 5 lakh, the capital cost will be so much, the rate of return, the depreciation and if I were to pay so much per car, it would be cheaper did you do the math in your head?
A: If I would have done that math, I would have end up buying a car at that point. Because the industry was still being run with a very different kind of a vision. But that is not how I believe first generation entrepreneurs end up starting off. For me at least, I think I can speak for many first generation entrepreneurs, it is about the vision and today’s reality might be very different from the vision but if you hold that the vision very clear and you won’t get there on day one, it will take years and years and we are not even there, it will take another 10 years to maybe half of that journey. But if you hold that clear you will constantly make progress every day. You will learn more about your industry you will learn more about your consumers, you will learn more about your suppliers, you will keep innovating so that every stakeholder is improving their experience and keep building towards the vision. I don’t believe innovations happen in a big bang approach. You have to keep learning more and keep innovating.
Q: I was just wondering if the math inspired you but then what triggered, why did you think of this? Is it that you were stranded one day and realised that this is a service needed what triggered that thought?
A: I had my own personal experiences when I was working for two years of not owning a car and having bad experiences with the public transport and in those times we had a few taxi companies so the experiences were not stellar. Pretty much they were costly, bad quality, took time to arrive. We had to call a call centre. If you remember back to those days four-five years ago, it was a very different experience.
But just talking a little bit about the opportunity, if you look at India unlike the West where everybody owns a car in India only about 2-3 percent of Indians own a car. It is much lesser penetrated market. Already our roads are blocked with so much chaotic traffic and in this system, we as a society cannot have a future where everybody owns a car. It is just not sustainable because we cannot build the kind of roads required to enable that. So our future of shared utility and shared ownership of assets or shared usership of assets is what we believe in and that is what we have been driving up. If people end up using ride sharing services not just in a limited way as a car service but across the kind of multi model platform that we have now, it can actually take a lot of vehicles off the road.
Q: Certainly, it can become a public service but have you worked towards it? Have you gone to say a Skyscraper a huge building complex and told them, sold the idea that none of you need to own cars if the building offered say 20 Olas, nobody needs to own and how many hours do we run the car maybe an hour a day or maybe half an hour a day. Have you tried that idea with any building or society?
A: The one person I have tried that idea with and took me sometime to succeed a few years ago but I finally did was my wife. When I started Ola, we were dating, we were not married and she had her car and it took me one and a half to two years to convince her to use Ola instead of her car but once she started using it, there was no looking back.
I will tell you another story this is a small town story. I grow up in a tier II town Ludhiana and my parents are still there, lived there, both of them are doctor there and between the two of them they own one car which my dad obviously goes to his hospital every day and my mother used to wait around for my dad to come back to take her shopping. So it used to be an encumbrance on my dad schedule and my mother schedule and when we started Ola in Ludhiana, my mother felt like it is a huge lease of freedom for her because she could now go to the grocery store on her own, she could go to the movies with her friend on her own. She didn’t have to wait for my dad to come home or to have a driver employed who will go pick up my dad’s car bring it home. So it is a very different feeling of freedom that lot of Indians have started to feel because this service exists.
Q: Then doesn’t it make sense, will that be the next step that you start working with governments to say that you make it legally uncompetitive or legally disadvantaged to own a car and to run such a service is that happening in any country at all?
A: Legal - even from a consumer or a driving experienced perspective, driving in our city is not pleasurable anymore. So driving in our cities is not going to improve anytime soon. So, the market needs and market realities are going to force people to use these services a lot more.
Q: You see that as the new reality that people will stop, I mean people have stopped driving for sure. Most of the guests who come to our studio normally come in one of the hailed taxis, they don’t come in their own car because parking everything is an issue, even if they get a driver, getting the driver to come to pick them up is a hassle in especially the place where CNBC-TV18 studios are?
A: Our approach has been and going forward even more so you will see us build a much more broader set of services.
Q: Has it happened in any country?
A: We are one of the global leaders in doing that. So if you look at our platforms today there are the car service which you can have Ola Prime, Ola Mini, Ola micro which is our bread and butter business. Then about a couple of years back, we launched our auto rickshaw business, which is all about first mile-last mile. Auto rickshaw is not a certain class of society. My wife uses auto rickshaw to go shopping around the block. If we go to Mumbai, everybody uses auto rickshaw in fact they are the biggest mode of transport in Bandra, which is the most premium area in the country. So auto rickshaw is all about quick first mile-last mile transport. We have a very large growing business in that.
Then we have also started focusing on how can we partner with the government and different cities and agencies in enabling better public transport.
Q: Which city governments have you spoken with?
A: A lot actually, we have acquired a company about few months back which partners with public transit agencies to help improve information flow. So, you can book a ticket in a bus service on this app it is called Ridlr and we are doing a lot more both with large cities and small cities in enabling much better mass transit.
Q: Which is your biggest lesson that you learnt from your journey?
A: Biggest lesson is business is about people, it is not about strategy or operations. At the end, if you understand people well, if you motivate people well, they will create a lot of magic. But if you focus too much on operations and as a first time entrepreneur, I used to do a lot of heavy lifting myself.
Q: What is a highest high?
A: Highest high is when consumer say that truly prefer and value your service and it has changed their lives and has had impact on society.
Q: Did it ever happen that some consumer told you that and you felt a high?
A: Every time, even today when let us say I go back home and somebody comes up to me and says l am less relied on my husband and lot of old people who live in small towns and their kids stay away from them find lot of freedom in this service. The impact that we can create in society is what truly gives most entrepreneurs a high.
Q: Was there any moment of low, when?
A: Lot of lows, highs and lows are part of the journey of sports people also and entrepreneur in equal measure. Lows are again when you feel that you should have done this and you make so many mistakes every month, every quarter and then when you look back you feel like how could I make such a mistake. Why didn’t I chose a right strategy? Why didn’t I hire the right person? And those are low points in your journey.
Q: When Walmart offered that huge money for Flipkart, was it a high or was it a low?
A: I am agonistic to it. It is not that it is a deal that I am part of.
Q: But you realise what valuations can be?
A: We are in the business for value creation not valuation. If we focus long term on having impact on society, we will create a lot of value and we will have a lot of valuation, that is our focus.
First Published: IST