Moody's lowers Ola's rating, warns of cash and loan troubles
What's the story
Ola's parent company, ANI Technologies, has had its credit rating downgraded by Moody's. The ratings agency has assigned a negative outlook to the company, citing its deteriorating operating performance and liquidity issues. These factors put Ola at risk of breaching loan covenants in the near future. The downgrade to Caa1 reflects ongoing weakness in Ola's operations that is eroding liquidity and raising the risk of a covenant breach in coming months, Sweta Patodia from Moody's Ratings said.
Covenant breach
What are loan covenants?
Loan covenants are small, independent agreements between borrowers and lenders. They clearly define actions that a borrower must or must not take. A breach of these covenants is seen as a technical default. In Ola's case, it could trigger an event of default and speed up repayment of its $65 million loan due in December 2026. Moody's highlighted that Ola needs to maintain cash equal to 40% of the outstanding loan, at least $26 million, to comply with this covenant.
Financial challenges
Ola is losing market share to Rapido
As of March 2025, Ola had some $90 million in cash. However, Moody's warned that this liquidity would fall short of meeting its debt service obligations and capital spending needs through December 2026. The company has also been losing market share to urban mobility start-up Rapido, which is raising funds for expansion. Despite backing from major investors like Z47 (formerly Matrix Partners India), SoftBank, Temasek and Tiger Global, Ola faces tough competition in India's ride-hailing sector.
Future plans
IPO, stake sale in EV maker being considered
Moody's noted that Ola is considering several options to improve its liquidity position, including a possible IPO and selling its 3.64% stake in publicly-listed electric vehicle maker Ola Electric Mobility. However, these plans are subject to execution and market risks. Without committed credit facilities or alternative refinancing arrangements, the likelihood of debt restructuring remains high over the next 12 months, Moody's warned.