Ola to raise $500 million in Term Loan B, gets B3 rating from Moody's

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"Ola's B3 CFR reflects its loss-making operations and high execution risks associated with its international expansion plans as well as its venture into India's competitive and fragmented food delivery and vehicle commerce sectors," said Stephanie Cheong, a Moody's assistant vice president and analyst.

Ola has ambitions of expanding its presence in the UK, Australia and New Zealand, Moody's note said. Moody's expects a high level of spending will be required to support Ola's growth plans, such that the company's annual cash burn (cash flow from operations less capital expenditures) will double to $140 million for at least the next two years, from $73 million in the year ending 31 March 2021 (fiscal 2021).

Moreover, Moody's added that Ola's cash and cash equivalents of $279 million as of March 31, 2021, will just cover the company's expected cash burn and scheduled debt maturities through December 2022.

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"As a result, the B3 rating is also premised on the successful completion of Ola's term loan transaction as planned, which will provide the required liquidity to sustain its operations beyond the next 12 months, as well as execute its growth plans," says Cheong, who is Moody's Lead Analyst for Ola.

On the other hand, the ratings will likely face downward pressure if the proposed transaction is delayed or if the funds raised are lower than the company's target of $500 million, in the absence of any alternative funding that shores up liquidity by year-end, Moody's added.

The company is currently in the midst of completing pre-IPO funding round to raise equity from new and existing investors and also targets to complete a public listing by the first half of 2022.

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