Cab-hailing service Ola will shut down TaxiForSure, a rival it acquired in March 2015, and cut up to 1,000 jobs, according to a media report.
The TaxiForSure employees being laid off include the company’s call centre workers and others in its driver relations and business development units, VCCircle reported, citing people with the direct knowledge of the development.
Ola wasn’t immediately available for comment.
According to at least half-a-dozen people with the direct knowledge of the development, about 90% of the staff being laid off from TaxiForSure works in the company’s call centres, driver relations and business development units. The employees that are being retrenched are located across a dozen cities and are being given three months’ salary as compensation, said the people mentioned above. These include current and former employees of the cab hailing company.
Two of the people said Ola shut down TaxiForSure on 30 July. All six declined to be named.
According to the newspaper’s report,the layoffs alone will help Ola save on Rs 30 crore in salaries every month.
Ola bought TaxiForSure in a deal worth $200 million nearly 18 months ago to consolidate its status as India’s most attractive cab-hailing app and widen its lead over Uber. Since buying TaxiForSure, Ola has been gradually reducing the company’s operations.
The closure of TaxiForSure comes after Uber made rapid strides last year and reduced the gap with its local rival.
Ola responded earlier this year by launching Micro, its lowest-cost offering and again built a sizeable lead over its American rival.
A merger in China, however, has changed the dynamics of the market.
Earlier in August, Uber said it would merge its China unit with Didi Chuxing, which is an investor in Ola, in a deal that values the merged entity at $35 billion, according to reports in Bloomberg and other news outlets.
Uber became the largest shareholder in Didi, with a 20% stake. In turn, Didi received Uber shares for a $1 billion investment, the reports said.
The Uber China-Didi merger shocked the start-up world. The two companies were locked in one of the most expensive market share battles in recent times. Yet, analysts said Didi with its strong local connections, access to large capital and deep local knowledge was always the likely winner to retain its dominance of the market. Uber accepted this eventually after burning through more than a $1 billion on luring Chinese customers and drivers to its platform.
It still managed to strike what is seen as a sweet deal: Become Didi’s largest shareholder, significantly cut its biggest area of expense and clear the path to a potential initial public offering.
But the deal has created a complicated scenario for Ola.
The merger may violate the shareholder agreement the Chinese company signed with Ola, India’s largest cab-hailing service, according to official documents, Mint reported on 11 August.