Cab-hailing firm Ola Consumer, which is reportedly eyeing an initial public offering (IPO) following on the heels of group company Ola Electric, has received a setback as an existing investor that last year slashed the Indian company’s valuation to a level seen nearly a decade ago has once again trimmed its fair value estimate.
A public fund managed by asset management giant Vanguard has revised its estimate of the fair value of its holding downwards by about 15% as of August 30.
Notably, it had slashed the value of its holding and as a result, the overall valuation of Ola to just under $2 billion as of November 30, 2023, as first reported by VCCircle.
As per its latest assessment, Vanguard reckons the fair valuation of Ola at around $2.1 billion, as per VCCircle estimates.
The same fund house had upped its fair value estimate by 23% early this year, effectively valuing Ola at around $2.5 billion. However, this did not move the needle much for the company that was once valued at over $7 billion. The latest assessment paints a painful picture again.
The ride-hailing company has been on a rollercoaster ride when it comes to valuation over the last four years and is now worth roughly half of its group firm Ola Electric, in which it owns around 4% stake.
Operated by ANI Technologies Pvt. Ltd, Ola Consumer was one of the worst-hit technology startups in India during COVID-19 as many companies switched to a work-from-home routine and physical distancing norms curbed demand for travel.
The company’s revenue plunged around 95% after India imposed a lockdown in late March 2020, co-founder and CEO Bhavish Aggarwal said at the time. This even forced the company to cut costs and lay off staff.
This likely prompted a public fund managed by Vanguard to slash Ola’s valuation by 45% in dollar terms between December 31, 2019 and June 30, 2020, from $6 billion to around $3.3 billion.
This fund again knocked down the value of its investment by 9.5% in dollar terms in the second half of 2020. This meant the investor reckoned the cab-hailing firm was worth around $3 billion, as per VCCircle estimates. The fund further marked down the valuation of the shares it held as of June 30, 2021.
Ola had issued shares to investors in its Series J financing round in 2019 at Rs 21,250 apiece.
Vanguard valued the shares at Rs 10,800 per share as of December 31, 2020, and Rs 8,800 apiece as of June 30, 2021, given the prevailing forex rates. It lifted its estimate of the share price to around Rs 10,400 apiece three months later and then more than doubled it to Rs 23,132 apiece by the end of 2021. This was around the same level at which Ola issued shares to some funds managed by IIFL, Edelweiss and Sunil Munjal’s family office. At the time, Ola raised $139 million at a valuation of $7.3 billion.
This valuation remained around the same level till end-2022 but the investment fund slashed the valuation by a third to around Rs 16,000-17,000 a share earlier last year, VCCircle had first reported.
Vanguard had revisited this number again subsequently. It reckoned the fair value of Ola’s share price was around Rs 12,500 each as of May 31, 2023. It went on to mark this down by a fourth in the following quarter valuing it around $2.7 billion at best, after factoring in the swing in forex rates that brings down the dollar valuation of India incorporated companies due to the depreciation of the Indian currency.
Its latest disclosure as of August 30, 2024, shows that it reckons the value of shares at around Rs 6,736 a share, as against Rs 8,430 a share as of May 31, 2024 and Rs 6,900 apiece as of February 2024.
A markdown by a public investment fund of what it believes is the correct valuation comes as a paint point as it is a fraction of what the company is aiming for in its long-delayed public offering.
Investors, however, make their own estimates according to different valuation models based on cash flows and other operating metrics. In the past, the Vanguard fund had said its estimate of Ola’s share value has been based on ‘significant unobservable inputs’.
A spokesperson for the investment fund had previously said the company doesn’t comment on individual securities, as per its policy.
Ola’s global peer, Uber Technologies Inc, had also seen its share price halve due to the pandemic. But New York-listed Uber has more than recovered. Barring a decline during early 2022 after a huge spike in 2021, it had stayed put around $30 a share. It has taken flight over the last twelve months and currently commands a market cap of $154 billion.
Started in December 2010, Ola was founded by two IIT Bombay graduates, current chairman and Group CEO, Bhavish Aggarwal and Ankit Bhati (former CTO). It is backed by marquee investors such as SoftBank, Tiger Global, Matrix Partners (now Z47), Temasek, Warburg Pincus and many others. Ola became a unicorn (private companies with a valuation of $1 billion or more) in 2015. Many of its backers also came to invest in Ola Electric.
Ola Electric that has been facing product related issues has seen its share price halve from the peak as product related problems continue to rile it.