The company is projecting a net operating loss of Rs 1,235 crore for the year ending March 2019 and a profit of Rs 746 crore for the year ending March 2020.
Take into account driver incentives and customer discounts, Ola has begun making money on each ride, which is a major milestone for India’s largest cab-hailing app. The company is on its way to profitability and is also targeting going public in the coming years, reports the Economic Times.
Sources told ET that the company still has work to do, which would mean recovering its expenses for salaries and technology, but its targeting profitability by year-end.
In an email to his employees, Ola CEO Bhavish Aggarwal said, “Last week, our India business crossed a major milestone. We are now ENTR positive.”
ENTS is effective net take rate. Take rate is the commission that cab companies like Ola and Uber charge from their drivers and ENTR is the take rate after eliminating costs like discounts per ride. When Ola and Uber were locked in a major battle in 2015 and 2016, they were losing Rs 100-200 on each ride, according to experts.
Aggarwal said, “This milestone has come after a consistent and persistent effort by the team and we have been able to achieve keeping the market share and growth steady.”
He also stressed on the fact that the company will become profitable, without losing any market share to rival Uber. Since internet companies measure losses and breakevens over weeks and months, making money for some time does not mean the company is profitable for an entire year.
In FY17, Ola’s operating losses were up 32 percent, while operating revenue more than doubled. The company was able to reduce variable costs like advertising and promotion expenses. However, fixed costs went up from Rs 461 crore to Rs 572 crore this year.
Ola also reduced its driver incentives to less than 20 percent of the gross booking value from about 60 percent in 2016.The company is projecting a net operating loss of Rs 1,235 crore for the year ending March 2019 and a profit of Rs 746 crore for the year ending March 2020.