homeauto NewsOla Electric eyes IPO at $7 billion valuation, experts raise questions over $3 billion surge in 2 months
Ola Electric eyes IPO at $7 billion valuation, experts raise questions over $3 billion surge in 2 months
Ola Elecric IPO date: The Initial Public Offering (IPO) aims to raise $700 million, potentially valuing the company between $7 billion and $8 billion. This valuation marks a substantial leap from previous funding rounds, prompting market experts to raise concerns about the swift increase in valuation.
Homegrown electric vehicle manufacturer Ola Electric is set to file its papers for its initial public offering (IPO) this week, and sources indicate the company is looking to raise $700 million through the exercise, which will give it a valuation of $7-8 billion.
That’s quite a jump from the valuation Ola Electric was assigned at its last round of fundraising. So, how is Ola going to justify this valuation?
For starters, market analysts believe that Ola Electric will have to show a clear path to profitability and growth to justify a $2–3 billion increase in valuation in just two months.
Experts CNBC-TV18 spoke to said that Ola's after-sales issues and high attrition rates are something that investors have been watching. Not just that, even in the EV two-wheeler space now, it is not just Ola, but larger legacy players like TVS, Bajaj Auto, and Hero MotoCorp are also showing growth and agility.
Some experts believe that Ola is factoring in its electric car plans in the valuation, and many investors would like to see the viability of the car plan and the product pipeline that Ola is working on across segments.
Ola Electric DRHP filing date
Ola Electric is likely to file its Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) in the coming days, slightly later than the earlier expected December 20 filing.
Ola Electric's fundraising journey
In April 2022, Ola Electric secured ₹929 crore from Tekne Private Ventures and an additional ₹57 crore from Alpha Ventures in a Series D funding round, resulting in a company valuation of $4.6 billion. By October 2023, further investment of ₹3,200 crore from SBI and Temasek had increased the company’s valuation to $5.4 billion.
Bhavish Aggarwal, the founder of Ola Electric, holds the largest share at 37%. Other significant shareholders include SoftBank at 23.6%, Tiger Global at 6.3%, ANI Technologies and Ola each at 4.7%, Matrix Partners at 3.8%, and Alpha Wave Global at 3.6%.
However, a Reuters report suggests that Ola Electric has reduced its sales forecast to 300,000 from 882,000 in FY24 and cut the FY24 revenue forecast from $1.5 billion to $591 million. Ola Electric has sold over 2.4 lakh vehicles in calendar year 2023, has a 35% market share and is looking to launch a giga factory for lithium-ion cell manufacturing by February.
Moreover, investors are also expected to scrutinise the viability of the company’s car plan, as the product is yet to be launched. Aggarwal, during the company’s annual event on August 15, 2022, announced plans for the company’s upcoming electric car.
Also Read: Ather Energy IPO: E-scooter maker Ola Electric's rival pads up to list on D-Street by Diwali 2024
Market experts claim that to justify its valuation, Ola must demonstrate its ability to launch viable products across different segments. In an interview earlier this year, Aggarwal hinted at delaying Ola’s electric car launch until early 2025.
Ola Electric has shown a consistent improvement in its gross margin, moving from a negative margin of -5.4% in FY22 to a positive 7.63% in FY23. Furthermore, Ola Electric plans to achieve EBITDA profitability by FY25, targeting a profit margin of 6.6%.
(Edited by : Vivek Dubey, Ajay Vaishnav)
First Published: Dec 20, 2023 7:09 PM IST
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