I have a question for ola and ather shareholders. Both of them have profit from operations in the negative and the hole keeps getting bigger each year. What do you actually look for in these companies? If someone can share insights I’d be grateful.
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Hi Gaurav,
Can’t say for others but here is what I see.
New 2W sales will be majority EV in about 3-4 years. Govt has set a target of 80% 2W as EV by 2030. I am ok if we achieve 50-60%. Currently, it is 5%. So, there is going to be a massive increase in production due to favourable policy of govt. Now, anyone who retains even 10-15% of that market will be profitable at that scale. The products are good. The capex is already done, OLA is also working on battery, chinks will be smoothed, service will be improved, parts availability will be managed as supply chain forms, roadside mechanics will also be sufficiently skilled with EVs in a few years.
This change is already happening. So, that is the play. People think Bajaj and TVS will take 100% share but that is not possible. We shall have perhaps 5-6 big players in the market. All will make money. Some more than others.
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How many 2W to be sold per month to achieve breakeven?
How much is the outstanding Debt? How much scooters to be sold to pay of the debt?
Whether that much Addressable market without competition there? Now add, with competition, how much TAM they can achieve?
Equity is not small portion (441 crores) + adjust for ESOP program + adjust for any other instrument. To make EPS of Rs 1, how much profit after tax needed.
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They will have EBIDTA breakeven at 25k per month. By my calculations, they will require to sell about 50k per month to achieve EPS of more than 1 rs.(This is a conservative estimate) Thereafter, it will be faster growth.
Currently, they sell 20k a month, after all the competition is here. Doing 50k a month won’t be much of an issue in next 5-6 quarters.
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So does this means that Ola is fully valued today for what they would be producing / earning after 1-2 years?
EPS 1 (when they produce 50K bikes), PE - 42 = Rs. 42 share price.
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A quick look at the balance sheet is enough to make one stay away from this company. With the current burn rate and remaining reserves it will be very diffcult to continue operations. We already have too many examples, latest being Gensol engineering: high debt, too many promises, founder being involved with many companies. Not saying Ola is going to close shop but it doesnt appeal for investment even with so much correction.
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That could be said about it at any price. In any case, I am betting on a 5-10 year period. As such, I would say it should do well even in 2 years, but nobody can actually be sure about it.
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I wouldn’t reply to this, but a comparison has been made with Gensol. As such, it had excellent balance sheet and looking at it today, one could actually be tempted to buy. But that is not where I invested. One must be very careful in making comparisons. 
As for money, I would say 4000 crore is enough to keep them running and expanding for 2 years and that is when I expect them to be profitable. Of course they will need about 2-3k crores more in the meanwhile to expand. I am sure they will find ways to get it.
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