What does Ola gain from acquiring Avail Finance?

Ride-hailing major Ola, which has been trying to boost its financial services business, seems to have stumbled upon a real bargain. It is acquiring Avail Finance in a share-swap deal that values the fintech at $50 million, down from the $86-million worth it registered in the last funding round. 

But a closer look reveals that the deal is a related-party transaction, prompting concerns about a potential conflict of interest. Plus, it brings little to the table, at least for now.

Avail, which helps blue-collar or gig workers obtain small loans, was launched by Ankush Aggarwal in 2017. Ankush is the younger brother of Ola founder and CEO Bhavish Aggarwal. Ola’s driver base has been a test case for Avail and before the latest development, Ola held a 9-10% stake in the fintech, which has raised $38 million in funding to date. Bhavish Aggarwal has been on its board from the beginning.

The deal is still “subject to shareholder approval”, according to Ola’s announcement. Though it is expected to sail through, a section of investors intends to voice concerns.

“Bhavish has a simple majority to push the deal through, so nothing can be done. But investors will raise apprehensions because this is unattractive from the standpoint of Ola’s IPO plans,” said a shareholder in the company. “Had this (Avail) been a good business, there would have been merit (in the transaction), but that’s not the case.” 

The buyout comes months after Avail’s urgent search for $30-40 million in fresh funding, said two people briefed on the matter. The belief is that the move will turbocharge Ola’s play in financial services. This is a long shot if we consider Avail’s pitch deck and Ola’s latest financials, accessed exclusively by The CapTable.