Ola’s Down Round Sparks Worries for India’s IPO Hopefuls

In the crazy world of Indian stocks, where companies are often valued like they're made of gold, things are starting to get a bit more real. Ola Electric, that big e-scooter company with SoftBank backing, has just announced it's going public. But here’s the kicker: they’re aiming for a valuation of up to $4 billion, which is actually 25% less than what they were worth in their last funding round in September. It's like someone telling you your fancy sports car is now worth only three-quarters of what you paid for it. This is making a lot of people think twice about investing in tech companies that haven’t made any real money yet.

Ola’s Story and Market Moves

So, Ola has become the big cheese in battery-powered scooters in just three years, which is pretty amazing. They’re the second biggest market for these two-wheeled wonders, and they control over a third of the whole pie in India. They’ve got some help from the government too, with sweet deals for making electric vehicles and batteries. They're even planning to start making their own lithium batteries next year, which is like making your own gas to save money on fuel.

Playing it Safe with Valuation

But even with all this growth, Ola’s playing it safe with their IPO price. It’s like they’re saying, “Hey, we know we’re not worth as much as we used to think we were, so let’s not get too crazy here.” Some big-name investors like Fidelity and Nomura are probably going to jump on board, but Ola’s valuation is now closer to what other companies like them are worth on the stock market. They're looking at a valuation of about $4.3 billion, which is based on their revenue of $600 million for the next fiscal year. That’s like saying, “We’re worth seven times what we make in a year.”

The thing is, their main rivals, TVS Motor and Bajaj Auto, are only valued at around 4.5 and 6 times their annual earnings, and they’re still selling those gas-guzzling scooters. It’s like comparing apples to oranges, but investors are getting more picky about who they give their money to.

Investors Getting Smarter, Less Excited

This change in how people are feeling about investing in companies that don’t make a profit yet is becoming a big deal. Take Nykaa’s parent company, FSN E-commerce. Their stock plummeted to one-sixth of its IPO price. Ouch. And Paytm’s parent company, One97 Communications, is dealing with some serious financial woes because of new banking rules.

What’s Next for Ola and Other Techy Companies?

Ola’s founder, Bhavish Aggarwal, is betting that if they sell more scooters, their profits will go up. They’re trying to save a bundle by making their own battery cells, which are a big part of their costs.

The bottom line is, Ola’s move to a down-round IPO is like a warning sign for other tech startups dreaming of going public. Now, everyone’s looking at the bottom line and thinking, “Can this company actually make money?” It’s like going on a diet after realizing you’ve been living on pizza and soda. The future for these companies is going to be all about being smart with their finances and not just growing for growth’s sake.