Vanguard Group Reduces Ola’s Valuation by 35% to $4.8 Billion
- ByStartupStory | May 11, 2023
The valuation of Ola, a cab-hailing startup, has been reduced by 35% to $4.8 billion by the Vanguard Group, a major global investment firm, from its earlier valuation of $7.4 billion. This markdown follows similar actions taken by shareholders toward other Indian startups such as Byju’s, Swiggy, and Oyo. These markdowns come at a time when investors are becoming more cautious due to concerns about a potential global recession and a decline in tech stocks in the previous year.
Vanguard has recently valued its stake in Ola at $33,865,000 as of February 28th, which is a decline from the previous year’s August value of $51,825,000. Based on Vanguard’s assessment, the current fair market value of Ola stands at approximately $4.8 billion.
The Vanguard Group has lowered its investment value in Ola for the third time, following previous reductions in the first half of 2020 by 45% and 9.5% in 2021. The Indian investment climate has experienced a funding slowdown, leading many investors to re-evaluate the valuation of their private holdings in tech startups, citing concerns that their shares may be overvalued. Despite this, Indian startups enjoyed a funding bull-run in CY21, raising a record-breaking $42 billion in funding, surpassing all previous year’s records.
Startup funding in India experienced a significant decline of around 40% to $25 billion in CY22 as investors re-evaluated their investments with high pricing premiums. This funding crunch led to a wave of layoffs that affected an estimated 18,000 employees. Invesco recently reduced the valuation of foodtech startup Swiggy by 48%, from $10.7 billion in January 2022 to $5.5 billion. Similarly, in April, BlackRock halved the valuation of India’s most valuable startup, Byju’s, from $22 billion to $11.5 billion.
Softbank, OYO’s largest shareholder, reduced its estimated value for the firm to $2.7 billion in the June quarter of 2021 from $3.4 billion, following a comparison with peers with similar operations. OYO had reached a $10 billion valuation in a 2019 funding round. Similarly, Ola’s valuation has been marked down due to a global reduction in ride-hailing volumes caused by the pandemic, with demand only partially recovering in India and still below pre-2020 levels.
Ola’s revenue in FY21 decreased by 65% to Rs 689.61 crore, mainly due to lockdown restrictions on public transport services. The company’s total loss for the period amounted to Rs 1,326.08 crore, which is lower than the Rs 1,714.62 crore loss recorded in FY20 on a standalone basis. As of yet, Ola has not yet filed its FY22 results.
In January 2023, Ola laid off approximately 200 employees across its different verticals, following multiple rounds of job cuts in the previous two years. Last year, the SoftBank-backed company let go of over 1,000 employees after closing its Ola Dash quick commerce wing and used car divisions. These layoffs coincide with Ola’s reported plans to file for an IPO later this year, which have been delayed due to “unfavorable market conditions.”
Despite its plans to nearly double its engineering team to 5,000 over the next year, Ola has recently undertaken a cost-cutting exercise. This comes even as Ola Electric achieved record sales of 25,000 scooters in December, increasing its market share to over 30%. Ola’s leadership has claimed that both the ride-hailing and electric vehicle businesses are profitable, though specific numbers were not disclosed.
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