Ola fires 1,400, says revenues plunge 95% in two months

BENGALURU: Ride-hailing service Ola has asked over a quarter of its workforce in India to leave the company, as it joins the swelling ranks of the country’s most valuable startups that are trimming headcount in a bid to combat the economic disruption wrought by Covid-19. Ola has seen revenue drop by 95% in the past two months, founder and chief executive officer Bhavish Aggarwal wrote in an email to employees on Wednesday, resulting in the decision to lay off employees in order to reduce costs amidst the pandemic.

“I write to all of you with the toughest decision I have ever taken – the need to downsize our organisation and let go of 1,400 of our valued employees,” he said in the email reviewed by ET.

Ola — backed by global marquee investors including SoftBank, Tiger Global, Tencent, and Steadview Capital—employs about 4,000 people in its Indian operations. It was valued at around $6 billion during its last funding round in September.


Dimming Prospects
The layoffs are across levels in the mobility business, food delivery arm Ola Foods, and Ola Financial Services, which operates OlaMoney. “..the prognosis ahead for our business is very unclear and uncertain. It is going to take a long time for people to go out and about like before...The world is not going to revert to the pre-Covid era anytime soon,” Aggarwal told employees. Those being laid off will receive a minimum financial payout of their fixed salary for three months, accelerated vesting to the closest quarter and insurance benefit till the end of 2020.

Late last year, Ola had laid off 5-8% of its workforce as part of its move towards breaking even, ET reported.

Now, as the economic devastation wrought by the pandemic spreads across the globe, the prospects for the ride-hailing business are dimming rapidly. More so, as enterprises move their employees to a work-from home model prompting lower demand for air travel and intracity trips. In the US, Uber too has announced global layoffs for over 3,000 full-time employees; it did not disclose how many of those affected are from its Indian business.

Ola, which also operates ride-hailing services overseas including in the UK and Australia, declined to share information on whether the layoffs will affect overseas employees. The company owns a subsidiary Ola Electric.

Ever since India ordered one of the most stringent lockdowns to halt the spread of Covid, 40% of startups have either temporarily halted operations or are in the process of shutting down, with around 70% having cash reserves to last less than 3 months, according to a survey by technology industry body Nasscom.

Several of the country’s most valuable startups like food delivery leaders Swiggy and Zomato, hotel aggregator Oyo, financial services major Paytm as well as others such as Curefit, Udaan and Livspace have asked hundreds of employees to leave due to drastic fall in business. Sharp paycuts have also been ordered at large companies including travel major MakeMyTrip, BookMyShow, Droom. A clutch of growth-stage companies like Meesho, Acko, Treebo, and Fab-Hotels have also slashed staff.

“This is only the beginning… as months progress and companies figure out an exit strategy, the numbers will only shoot up,” said an investor at a top venture firm.

Companies are at pains to point out that the pink slips are solely because of the impact of Covid-19. “(They are) not reflective of anyone’s performance and are purely a function of the uncontrollable circumstances that we have been faced with,” Ola’s Aggarwal said — a sentiment mirrored by founders across the board.

On Monday, Sriharsha Majety, CEO, Swiggy, told employees that the decision to lay off 1,100 staff was led by the food delivery business, particularly, cloud kitchens, being severely impacted by Covid-19. “..Nobody knows how long the uncertainty will last,” he told employees in an email. Zomato’s Deepinder Goyal too forecast that up to 40% of restaurants may shut shop.

Typically, those laying off employees have offered a three month severance including Oyo, Swiggy and Curefit, while Livspace is providing a month’s severance. All companies have, however, extended accelerated share vesting, medical insurance cover till the end of the year, along with counselling and setting up of an inhouse portal for job placement.

Globally the mobility and hospitality sectors have been the worst hit by the pandemic. Uber has so far laid off about a quarter of its global workforce, US-based ride-hailing firm Lyft has reduced its headcount by 17%, apart from furloughing a few hundred other employees. Others including Lime, Bird, Airbnb have also cut employee count.