The curious case of Bhavish Aggarwal and Ola Electric
More than a decade after the Lehman Brothers bust unleashed the greatest tide of liquidity seen in the history of mankind, across the world we are now seeing weird & wonderful transactions in the Tech sector. From WeWork’s stalled IPO to Uber’s tanking share price to, closer home, the remarkable valuation of Ola Electric. Moneycontrol has published a neat little article on the latter issue.
Ola, the parent company, was “founded in 2010, Ola has raised $3.3 billion to date, and is valued at $5.7 billion. Key investors in the startup include SoftBank, Tiger Global, Tencent, Matrix Partners and DST Global.”
Now, let’s look at the subsidiary, Ola Electric, the main subject of the article. “On May 26, 2017, Ola Electric was set up as a 100 percent subsidiary of ANI Technologies, which operates Ola, India’s largest cab aggregator. A few dozen people were employed by Ola Electric, but they continued to be on the payroll of Ola (aka ANI Technologies).
Between December 2018 and January 2019, Bhavish Aggarwal, the founder and CEO of Ola, purchased 92.5 percent of the stake in Ola Electric for Rs 92,500. The balance stake was held by Ola for using its brand name. Soon after, a few dozen employees were transferred as full-time Ola Electric employees, documents seen by Moneycontrol show….
In March, Ola Electric raised Rs 300 crore ($42.2 million) from Matrix Partners, Ratan Tata and Tiger Global at an undisclosed valuation. The fundraising was closed in February itself, a month after Aggarwal completed the buyout of Ola Electric. And then, in July, Ola Electric announced that it had raised $250 million from SoftBank at a valuation of $1 billion. Udaan says it is the fastest unicorn in India, taking 25 months to reach this milestone.”
The Moneycontrol article poses some simple questions: “Between January, when Aggarwal valued Ola Electric at Rs 1 lakh, and July, when it was valued at $1 billion, what changed? Did Ola Electric do something so electrifying that its valuation was supercharged from nothing to a billion dollars in less than six months?”
And here is the most ironic aspect of the Ola Electric valuation: “Today, Aggarwal owns a 40 percent stake in Ola Electric worth $400 million. He owns 6.7 percent of Ola, which puts the value of his holding in the company at $382 million. So, for having built Ola from scratch for nine years, Aggarwal’s stake in the company is worth less than what he managed to obtain in just a few months through Ola Electric.”