Moody’s Downgrades Ola Ratings, Citing Risk of Loan Covenant Breach

Global ratings agency Moody’s downgraded the credit rating of Ola’s parent company, ANI Technologies, and assigned a negative outlook, citing weakening operating performance that has weighed on liquidity and raised the risk of a breach of loan covenants.

“The downgrade to Caa1 and negative outlook reflect the ongoing weakness in Ola’s operating performance that is eroding liquidity and raising the risk of a covenant breach in the coming months,” said Sweta Parodia, Assistant Vice President and Analyst at Moody’s Ratings.

What Are Loan Covenants?

Loan covenants are agreements between a borrower and a lender that lay out certain conditions the borrower must adhere to. A breach of covenants is treated as an event of technical default. In December 2021, Ola raised $500 million from global institutional investors through a term loan to fund the company’s expansion across various businesses. At that time, the company had entered the quick commerce segment but has since exited that space.

Moody’s stated that a breach would constitute a default and accelerate repayment of its $65 million loan due in December next year, The Economic Times reported. The company must maintain cash equal to 40% of the outstanding loan—amounting to $26 million—in order to comply with the covenant, Moody’s said.

As of March 2025, Ola had maintained $90 million in cash, but Moody’s stated that this will “substantially fall short” of meeting the loan repayment obligations and capital spending by December 2026.

“Sustained operating weakness has resulted in higher-than-expected cash burn during the six months ended September 30, 2025. This has reduced cash substantially from $90 million in March 2025 and lowered the headroom under the term loan covenant,” Moody’s said.

Market Bids Adieu to Ola

According to a report by The Economic Times, Ola has been losing market share in ride-hailing to its competitor Rapido, which is closing a $550 million round that includes $300 million in fresh capital. The segment is also led by Uber, which holds nearly 50% dominance in the four-wheeler taxi segment.

“Intense competition in India’s ride-hailing sector will result in continued cash burn over the next 12 months. As such, the company will have to rely on external funding sources to refinance its upcoming loan maturity,” Moody’s said.

For the quarter ended September, Ola posted a net loss of ₹418 crore, narrowing from ₹495 crore last year. The company’s revenue fell 43% year-on-year to ₹690 crore. The ratings agency noted that Ola is exploring several options to raise liquidity, including a potential initial public offering (IPO) and the sale of its 3.64% stake in Ola Electric Mobility, ET reported. However, Moody’s said these moves “remain subject to execution and market risks.”