India’s Ola is the latest ride-hailing company to raise a massive round of financing, but it’s not all good news.

The company has reportedly secured $330 million at a valuation of $3.5 billion, down from the $5 billion valuation it achieved with a $500 million round in late 2015. Reports indicate Ola’s fresh funding comes in part from SoftBank, which could mean the Japanese tech conglomerate is dipping into its new $100 billion fund. This investment brings the company’s total VC financing to more than $1.5 billion; existing investors include Tiger Global Management and Sequoia India.

Ola

Ola

One possible reason for Ola’s sinking valuation is competition from Uber, which has been stepping up investment in its Indian business. Along with increased investment in India, Uber is growing its services in the country. In March 2016, the company expanded its motorbike service from Bangkok to Ola’s hometown of Bangalore—the same week Ola launched a motorbike service there.

Uber’s focus on India only increased after the ridesharing giant sold its China business to rival Didi Chuxing in August, ending the fierce battle for market share in the country that was causing both companies to burn through millions. It appears Uber is increasing its efforts in India to avoid a similar turn of events with Ola, which is said to control more of the local market, at least as of the end of last year. Ola’s dipping valuation could indicate that Uber’s efforts are having an effect.

But Ola has been fighting back. Along with its competing motorbike service, Ola previously partnered with ?Didi, Lyft (Uber’s main US competitor) and Grab (Southeast Asia) in what’s been called an “anti-Uber alliance.” The alliance allowed for cross-booking among the companies’ apps, which means, for example, that Lyft users could use the app to book an Ola ride in India and vice versa. The purpose was to compete with Uber, but it’s unclear where those partnerships stand, especially considering Didi now holds a considerable stake in Uber.

While a down round isn’t great news, things may be looking up for Ola and other international ridesharing companies, as Uber has been swimming in negative PR over the last few weeks. First came a former engineer’s blog post, accusing the company of widespread and unchecked sexual harassment. Then, just a few days later, Uber SVP of engineering Amit Singhal stepped down after the company was alerted to sexual harassment claims made against him during his tenure at Google.

Check out some of our previous coverage of the ridesharing industry or learn more about Uber or Ola in their free profiles.

Article by Dana Olsen, PitchBook

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