Ola might be looking to transform itself from a ride hailing company to an electric vehicle manufacturing powerhouse, but its investors seem circumspect about its plans.
Investment firm Vanguard, which is a minority investor in Ola, has slashed the valuation of its Ola shares by 9.5%, valuing the startup at around $3 billion. The markdown comes after the investment firm had marked down the value of its Ola shares by 45% between December 2019, and June 2020. Vanguard owns around 1% of Ola’s shares. Ola had a peak valuation of around $6 billion.
The dramatic drop in Ola’s valuation is understandable — India’s ride-hailing sector is still to recover from the coronavirus pandemic, which had caused a nation-wide lockdown. As per a recent Redseer report, the ride-hailing industry has returned to only 63% of its pre-Covid levels in India. This is in contrast to the food delivery industry, which seems to have largely recovered, and even surpassed its pre-Covid levels. This has reflected in company valuations — Zomato’s valuation has zoomed to $5.4 billion since after the pandemic.
Ola, though, will find it harder to get back to pre-pandemic levels — with many companies deciding to work from home for the near future, and many employees having left major metros for their hometowns, it could be a while before ride-hailing demand reaches pre-pandemic levels. As such, Ola seems to have decided to instead focus its energies on becoming a manufacturer of electric vehicles — Ola is spending Rs. 2100 crore to build what it says will be the world’s largest two-wheeler EV factory in Tamil Nadu. By 2022, Ola says that the factory will produce 10 million electric two-wheelers per year.
It’s an ambitious plan, but given how Ola can hardly expect its ride-hailing business to grow substantially in he coming years, can help Ola create a whole new manufacturing vertical for itself. But until its two-wheeler manufacturing model is proven, Ola can find that it could be a while before its valuation reaches pre-pandemic levels. Apart from coming in the way of its IPO plans, the lowered valuation can also make it harder to retain talent — the former head of Ola Food, Pranay Jivrajka, who’d been given the status of founding partner, quit the company last week. And with its investors now valuing Ola at just $3 billion, Ola, which was once at the top of the pile as far as India’s most valuable startups were concerned, now appears to be relegated firmly to the middle of the table.