While several analysts have called the valuation set by Ola Electric for its IPO decent, they also flagged concerns over rising competition in the electric two-wheeler space and the company’s profitability.
A research head at a top-tier domestic brokerage firm said Ola Electric Mobility lowered the valuations because domestic institutions were not happy with the high valuations.
Ambareesh Baliga, an independent market analyst, said the current valuation is 20% lower than the company’s last fundraising round, and that at this level, it is a decent bargain for investors.
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Baliga does not expect it to be a difficult task for the IPO to get subscriptions, given the robust inflows in primary market and strong sentiments in the secondary market. However, he added that the company is unlikely to see extravagant subscription numbers.
Ola Electric Mobility has set the price band at `72-76 per share for its much-anticipated IPO. At the upper end of the price band, Ola Electric’s valuation stands at `33,500 crore (approximately $4 billion).
Recounting the experience of investors with new-age companies like Zomato and Paytm parent One97 Communications, which came to the market at higher valuations and were not profitable, the experts pointed out that the companies coming to the market now would be aware of investors’ expectations.
Prem Doshi, founder and fund manager at ACE Equities, said: “Compared with other tech company IPOs that we have seen in the last 2-3 years, Ola Electric is coming in at better valuation.”
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“If they manage to increase their capacity and penetrate deeper into the electric two-wheeler market, they can make a case for higher valuations going forward,” he added.
While Ola Electric commands a chunk of the market share in the electric two-wheeler segment in India, fund managers said this may come down going ahead as the traditional, larger companies launch new EV products.
The Ola Electric stock was trading at a grey market premium of `12 per share to the upper band of the issue price on Monday, which translates to a premium of around 16%.
Market participants believe the movement in the grey market premium of the company’s shares through the subscription process will also be crucial to assess the IPO demand.
