India can benefit from China’s regulatory crackdown, says Ola chief

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The founder of one of India’s biggest start-ups has urged the country’s entrepreneurs to take advantage of a “unique opportunity” to win over foreign investors as regulatory turmoil scares global funds off China.

Bhavish Aggarwal, chief executive of Ola, the SoftBank-backed ride-sharing group, said start-ups should publicise the merits of investing in India as a crackdown by Beijing has wiped billions of dollars off the value of some of China’s biggest companies.

“In general, India is a much more rule-of-law, market-driven economy, unlike China,” he said. “The onus is on Indian entrepreneurs to really engage with investors and tell them about both their business and the India story.

“Investors are becoming smarter about the India opportunity which is different from the China opportunity in its texture, but very similar in terms of scale,” he added.

Fundraising by Indian start-ups has soared this year. Companies raised a record $13.7bn in the third quarter of 2021, up from the previous high of $7.2bn in the three months ending in June, according to data provider Tracxn.

Ola’s electric vehicle unit last week raised $200m from investors, including SoftBank and Falcon Edge Capital, a New York-based hedge fund, that valued the company at $3bn.

India’s public markets have also been on an 18-month bull run, helped by steady foreign investor inflows in August and September.

The country has long come second to China as an investment destination but entrepreneurs hope that comparative regulatory stability, accelerating digital adoption and the country’s growing population — India is projected to overtake China in the coming years — will change that dynamic.

A number of Indian tech companies plan to capitalise on the bullish mood by going public in the coming months, including Ola and Oyo, the hotel-booking platform. Aggarwal said the company was “definitely” planning an initial public offering within the next year but declined to comment further.

Ola is preparing to file its listing papers and seeking to raise as much as $2bn, according to people familiar with the matter.

The company’s core ride-sharing business was hit by the pandemic as mobility dropped sharply in 2020 and again this year during India’s brutal second wave. Aggarwal said the business had recovered to pre-Covid levels and was profitable.

Ola is also expanding into manufacturing electric scooters and expects to begin delivery of its S1 model this month.

India is the world’s largest market for two-wheelers, with cheap, functional models dominating a market where cars remain unaffordable to much of the population. Indian authorities have unveiled a series of subsidies to encourage a shift to electric over petrol-burning vehicles to deal with the world’s worst air pollution levels.

But Aggarwal’s ambitions face a number of challenges. So-called gig economy companies such as food-delivery group Zomato and Ola, which treat drivers as self-employed “partners” rather than employees, face sustained pressure to improve conditions.

Vital electric vehicle infrastructure, including charging points, also remains under-developed, though Aggarwal said this would follow as the market expands.

“The surrounding infrastructure will also be driven by market forces . . . As consumer demand grows, the charging ecosystem will also get built,” he added. “In the two-wheeler space specifically, we believe the market and consumer is ready for adopting electric vehicles en masse.”

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