Ola down round will worry India's IPO hopefuls
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Shritama Bose
MUMBAI, July 30(Reuters Breakingviews) -Indian equities are trading at eye-popping premiums, but a bit of caution is creeping into one corner of the market. SoftBank-backed 9984.T e-scooter maker Ola Electric on Monday launched its initial public offering, seeking a valuation of up to $4 billion. That's a quarter lower than its previous funding round in September, a sign that investor patience for unprofitable tech stars is running thin. It sends a warning to other upstarts eyeing a stock market debut.
It took Ola just three years to become the largest manufacturer of battery-run scooters in the world’s second-biggest market for two-wheelers, accounting for more than a third of sales during the year to the end of March. And its share is still growing.
It helps that the company founded by Bhavish Aggarwal has benefitted from New Delhi’s production-linked subsidies for making electric vehicles and the cells to fuel them. It expects to power its bikes with its own lithium batteries, starting next year.
Such stellar growth is appealing. Fidelity and Nomura are likely to be anchor investors, Reuters reported on Monday, citing unnamed sources with direct knowledge. Yet, the insistence on a down-round signals they want Ola’s valuation to hew closer to those of its listed competitors.
At the top end of its IPO price band, Ola’s enterprise value works out to $4.3 billion after accounting for outstanding debt and lease liabilities worth $325 million,according to Breakingviews calculations based on the company’s prospectus. That implies a multiple of 7 times its $600 million revenue for 2023 to 2024, higher than closest rival TVS Motor’s TVSM.NS 4.5 times and Bajaj Auto’s BAJA.NS 6 times. Both firms currently sell more gas guzzlers than EVs.
Profitability is front of mind for investors singed by the post-listing performance of India’s former tech poster children. Beauty retailer Nykaa’s parent FSN E-commerce FSNE.NS is trading at one-sixth its 2021 IPO price and Paytm owner One97 Communications’PAYT.NS losses are widening after regulators ordered its banking unit to wind down.
Aggarwal is betting on sales growth to drive margin gains. Using its own cells may also help Ola cut spending on a component constituting one-third of the overall cost of making an e-scooter, he said on Monday.
Investors are less willing to pay upfront for those gains. That’s a message for food delivery giant Swiggy, which has filed confidentially for a $1.3 billion float and whose bigger rival Zomato ZOMT.NS turned profitable in the last financial year.
Scale is still a big selling point in India, but it’s no longer an adequate one.
Follow @ShritamaBose on X
CONTEXT NEWS
SoftBank-backed Indian e-scooter maker Ola Electric will offer shares in a price band of 72-76 rupees ($0.86-$0.91) in its initial public offering, which will open on Aug. 2,the company said on July 29.
The offer is set to draw investor bids from Fidelity, Nomura and Norway's Norges Bank, as well as several Indian mutual funds, Reuters reported separately on the same day, citing two sources with direct knowledge.
Graphic: Ola bags a multiple higher than peers https://reut.rs/3yubFBn
Editing by Antony Currie and Ujjaini Dutta
Últimas noticias
Descargo de responsabilidades: Cada una de las entidades de XM Group proporciona un servicio de solo ejecución y acceso a nuestra plataforma de trading online, permitiendo a una persona ver o usar el contenido disponible en o a través del sitio web, sin intención de cambiarlo ni ampliarlo. Dicho acceso y uso están sujetos en todo momento a: (i) Términos y Condiciones; (ii) Advertencias de riesgo; y (iii) Descargo completo de responsabilidades. Por lo tanto, dicho contenido se proporciona exclusivamente como información general. En particular, por favor tenga en cuenta que, los contenidos de nuestra plataforma de trading online no son ni solicitud ni una oferta para entrar a realizar transacciones en los mercados financieros. Operar en cualquier mercado financiero implica un nivel de riesgo significativo para su capital.
Todo el material publicado en nuestra plataforma de trading online tiene únicamente fines educativos/informativos y no contiene –y no debe considerarse que contenga– asesoramiento ni recomendaciones financieras, tributarias o de inversión, ni un registro de nuestros precios de trading, ni una oferta ni solicitud de transacción con instrumentos financieros ni promociones financieras no solicitadas.
Cualquier contenido de terceros, así como el contenido preparado por XM, como por ejemplo opiniones, noticias, investigaciones, análisis, precios, otras informaciones o enlaces a sitios de terceros que figuran en este sitio web se proporcionan “tal cual”, como comentarios generales del mercado y no constituyen un asesoramiento en materia de inversión. En la medida en que cualquier contenido se interprete como investigación de inversión, usted debe tener en cuenta y aceptar que dicho contenido no fue concebido ni elaborado de acuerdo con los requisitos legales diseñados para promover la independencia en materia de investigación de inversiones y, por tanto, se considera como una comunicación comercial en virtud de las leyes y regulaciones pertinentes. Por favor, asegúrese de haber leído y comprendido nuestro Aviso sobre investigación de inversión no independiente y advertencia de riesgo en relación con la información anterior, al que se puede acceder aquí.
