Indian cab-hailing firm Ola is adopting a holding company structure similar to that of India’s most successful internet startup Flipkart to boost the cab-hailing company’s valuation and improve the management of its businesses, reported Live Mint, citing four people familiar with the matter.
For uninitiated, a “holding company” is a company that owns other companies’ outstanding stock. A holding company usually does not produce goods or services itself but its purpose is to own shares of other companies — or different business units in Ola’s case — to form a corporate group. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies.
Ola (ANI Technologies Pvt. Ltd) will set up a holding company that will own different business units, including its core cab business, food delivery app Foodpanda and the nascent businesses of electric vehicles (EV) and the international unit, the people cited above said on condition of anonymity. These businesses and some others are expected to have their respective heads who will run them independently, said the report.
After the recent departure of Ola’s chief operating officer Vishal Kaul, senior vice-presidents Saikiran Krishnamurthy and Pallav Singh are expected to get bigger roles under the new structure.
Ola chief executive Bhavish Aggarwal wants to create a similar structure to that of Flipkart, the people said.
“It’s becoming difficult for Bhavish to devote attention to all the different businesses. The group structure is an efficient way to increase management bandwidth,” one of the four people cited in the Live Mint report said.
In March, Ola hired former BMW executive Anand Shah to head the electric vehicle business.
It also appointed Pranay Jivrajka as CEO of Foodpanda, which may raise funds separately later this year.
Ola had bought Foodpanda in December in an all-stock deal and said it will invest $200 million towards growing the business.
In Flipkart’s case, the holding or group company structure allowed the homegrown e-commerce firm to improve its overall valuation and give enough management focus to each business, which were independent of the others.
Google too, after rebranding its “collection of companies” to Alphabet, in 2015, formed a new holding company, called XXVI Holdings Inc., in September 2017.