Home-grown ride-hailing service Ola is all set to break into profits. The company has announced that it is making money on each ride after taking away the discounts, and driver incentives. The development comes at a time when Ola is gearing for its IPO (Initial Public Offering) in the next couple of years.
Though Ola is making money on each ride, it still has a long way to go. Currently, expenses on each ride account for the driver incentives and discounts it offers to its customers. It still needs to recover its workforce salaries and the tech. expenses in order to show profits in its balance sheet.
In an email written to his team last month, Ola CEO Bhavish Aggarwal said, “Last week, our India business crossed a major milestone. We are not ENTR positive. The milestone has come after a consistent and persistent effort that all of you contributed in, and we’ve been able to achieve it keeping the market share and growth steady”. ENTR is an important metric for ride-hailing companies. It stands for “Effective Net Rate”. After Uber started the fare-war, ride-hailing companies were losing Rs 100 – Rs 200 per ride in 2015 and 2016.
It should be noted that Ola reported an operating loss of INR 3731 crores (around $550 million) for the financial year ending 2017. This was a 32% increase in operating loss from the previous year. While the good news is, limiting the losses per ride will eventually lead the company towards profitability, though in the immediate future it is expected to decrease it’s operating losses.