SoftBank-backed Ola kicks off cost-cutting exercise, may lay off 400-500 staff

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Mobility platform Ola is seeking to significantly bring down its costs, a move that could result in 400-500 employees being laid off, amid a delay in listing plans and a tough funding environment, according to sources.

The move to undertake layoffs also comes days after Ola decided to shut down Ola Dash, its quick commerce business, and also recast its cars business to focus more on strengthening its electric division. The company said then that the moves are part of its strategy to accelerate its electrification journey and build on its core capabilities in Mobility services and Financial services.

"Key managers were asked to draw up a list of people from their respective teams last week who can be let go," a source familiar with the development said.

The person further said that Ola has also hit the brakes on investments in overseas markets where it is present, such as the UK, Australia, and New Zealand. "They have stopped spending in international markets. They have a single-digit market share now in countries like the UK and New Zealand," a second person said.

Sources estimate that Ola has around 1,000-1,100 employees in the core mobility business. "They clock a revenue of Rs 100-150 crore a month, with a profit of around Rs 40-50 crore. "Shedding cash burn heavy businesses like Dash and cutting employee costs will give them more operational runway and also show a profitable business if they want to IPO," the second person said.

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While Ola did not comment specifically on these layoffs or the number of people who would be impacted, it said its core continues to be the broader mobility industry, be it ride-hailing, auto retail, financial services, or electric vehicles, in a statement to Moneycontrol.

"Today our riding hailing business is delivering its highest ever GMV month on month. As we continue to grow, we will look at leaner and consolidated teams and capabilities and scale in a manner that keeps our strong profitability intact" it said signalling cost-cutting ahead. It however did not put a number on its GMV (gross merchandise value).

It recently said that Ola Electric, which surpassed Rs 500 crore revenue in its first two months of FY 22-23, is on track to surpass the $1 billion run rate by end of this year. Ola will also be expanding its 2 Wheeler portfolio with plans to launch its second EV scooter aimed at the mass market, to be introduced before the end of this year. However, Ola Electric slipped to the fourth position in terms of electric vehicle registrations in June 2022, just months after reaching the top position, as per the government's Vahan dashboard.

As per Vahan data, Ola Electric clocked around 5,874 electric vehicle (EV) registrations for June 2022, a 36.5% drop from 9,255 registrations in May 2022 and less than half of 12,703 registrations in April 2022, the month it became the top electric vehicle maker in the country.

Reacting to this, a company spokesperson said, “We were prepared to see the impact of supply chain constraints, especially on cell shortage in June. Come July, we are confident that supply chain issues will start fading out and our strong order book will be fulfilled."

There has also been a change of guard at Ola, with founder and CEO Bhavish Aggarwal stepping back from day-to-day operations to focus more on engineering functions, team building, and products, apart from focusing on long-term strategic projects such as two-wheelers, cars, and innovations in quick commerce and international expansion. GR Arun Kumar, who joined less than a year ago and is currently the Group CFO of Ola and CFO of Ola Electric is now managing day-to-day operations across the group.

Moneycontrol also reported recently that Ola, which was planning to list on the public markets this year, now plans to raise a new round of funding at a lower valuation, signifying a sharp reversal in fortune for startups, after a record 2021 that saw sky-high valuations in the public and private markets.

Ola was last valued at $7.3 billion when it raised $139 million in its Series J round, led by Edelweiss PE, IIFL, and Sunil Munjal-led Hero Enterprises, in what seemed like the last round of funding before its IPO.

Before the $139 million, it raised $500 million from Warburg Pincus and Temasek, giving early backers Tiger and Matrix a part exit in the company. Aggarwal had earlier said that Ola plans to go public in the first half of 2022.

He also outlined plans to create a super app that would offer not just mobility but also loans and microinsurance. Bengaluru-based Aggarwal is the founder of two unicorns- the ride-hailing business Ola and Ola Electric, which has ambitious plans to disrupt the electric two-wheeler market.