No re-routing: Ola Electric must stick to its road-map for investors
- The IPO-bound electric scooter maker has been a success and boasts of its own gigafactory, but going public will mean far greater accountability. Investors expect discipline. Unexplained shifts in strategy, as seen in its swerve away from electric cars, just won’t do.
India’s transition to clean energy has been short of climate-action heroes, so it’s natural for investor interest to chase Bhavish Aggarwal-led Ola Electric, which leads the local market for electric scooters, selling four out of every ten rolling onto Indian streets.
This startup had a dream ascent to unicorn status, as it zipped past older rivals, fuelled by a perfect storm of factors: an acceleration in demand for electric vehicles (EVs), a receptive audience for an aggressive sales pitch and government support by way of a price subsidy.
For B-schools, Ola serves as a splendid case study of brand extension: from taxi services to EVs. And Ola Electric is now set to go public with an equity offer that places its value at around ₹33,500 crore.
Also read: Ola Electric IPO: SoftBank-backed E2W maker raises ₹2,763 crore from anchor investors ahead of subscription
Large as this may seem, it’s only 40% of what the company was earlier looking at, reportedly, and also a steep drop from its last funding round, which valued it at $5.4 billion. Naturally, too, Ola’s ramp-up to this stage invites closer scrutiny.
While Aggarwal has averred that Ola Electric’s valuation was cut to make its share issue more attractive for investors, there’s a trail of signs that point to a less-than-smooth ride thus far. Take the scope of Ola’s market ambition, a key determinant of what value it could foreseeably create for shareholders.
On Independence Day, Ola plans to reveal details of an electric motorcycle on its launch pad. Scroll back to 15 August 2022, though, and it was India’s four-wheeler market being served notice of Ola’s entry.
“Indian carmakers are conservative, thinking that we only want small cars or maybe mid-sized cars," Aggarwal had then said at a livestream titled ‘Mission 2022,’ “Global automakers think that the Indian market is not ready for world-class tech and hence sell their hand-me-down tech in India... We deserve a car that defines our new destiny."
With this review of a market gap, he promised an electric car that would be the fastest made in India, with a pedal thrust taking it to 100kmph in under four seconds, a range of over 500km per charge, an all-glass roof and advanced digital tech. Its launch? 2024. Or so it said on the screen at the end of that spiel.
Today, Ola’s IPO papers make no mention of any electric car. According to Aggarwal, the company never formally communicated any timeline for what was showcased as an “aspiration product," and its shift in priority is part of a broader strategy to build a robust EV ecosystem. The company recently set up a gigafactory in Tamil Nadu, a unit that makes lithium-ion cells to power EVs.
Also read: Ola Electric IPO: Will the electric two-wheeler maker become one-stop shop for EV industry? Here’s what analysts say
Although battery making success could give Ola an edge in the EV transition, the awkward car episode means it can expect hard questions from investors just to assess the realism of its business strategy. Some of its practices have been under a cloud too.
As Mint recently reported, some of its market share was on account of scooters sold to its own group entity. It also has an employee attrition rate that’s higher than it should be at this stage of a startup. Earlier, its scooter safety record had attracted criticism.
Although such problems can be overcome, it’s clear that its management must take extra care in adapting to the discipline that a publicly listed company demands. Investors will expect strategic clarity, with no sudden swings in market focus.
An entrepreneurial culture may place a premium on ‘flexibility,’ with startup lore full of quick reversals and alternative paths, but a widely held corporation must hunker down on what investors have been led to expect. Unexplained re-routing won’t do.
Also read: Will investors greet Ola IPO at lower valuation?
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