Ola Electric is one of the EV two wheeler manufacturing companies in India. This company issued ipo very recently. This week the share price of the company declined nearly by 8% after a tweet from Kunal Kamra, a stand up comedian. He mentioned about the service deficiencies in the company. This was the reason for the correction in the stock price.
After the company got listed at the price level of Rs. 76 per share, the price crossed Rs. 140 per share. But currently the stock is trading at a price of Rs. 90 levels, as on October 11th close.
Now the question is, whether the stock worth investing? This must be the query of many people. So let us look into it.
Should we invest in this company?
Since the company is familiar there is no need of an introduction, but if we want to describe its business in simple terms, the company is into the business of manufacturing ev scooters and ev vehicle components.
Why is it not similar to successful startups like Zomato?
First thing that many experienced investors would notice is that, the company is basically a loss making entity. Its free cash flow is also negative. But now people would get a logical question that, even companies like Zomato were once loss making but didn't they survive.
The expenses and efforts made by a company tells whether it will survive in the long run or not. When Zomato was into the business it did not face much competition. Further they spent huge capex and created a strong base. They took good efforts so that their service could reach to all parts of the country.
But this is not the case with Ola Electric. It faces severe competition from two wheeler market giants like Hero Motocorp, TVS Motors, Bajaj, and Ather. Also Honda, which another two wheeler market leader, are planning to launch their EV next year. It is said that, Honda has around 40% of share in scooter market in India.
Further there are many reports about the deficiency in service and also defects in EV scooters manufactured by this company.
Issues in the company as reported by the customers and media:
Recently [ in past 2 months], we could see that the market share of this company has been reducing. This makes the situation even worse. At least, if they could improve their service quality and product quality they could expect surviving or they should try to launch new product lines. I mean like, how Zomato acquired Blinkit. But even to do such things, a company should have a good cash flow.
Conclusion:
So, in my view the company is not looking attractive as of now. But situations may change if they could gain market share, or improve product quality. But gaining market share is not that easy. This is because their peers in EV scooters are preferred more by the people due to their quality of product and service. So, as I said above the company faces a severe competition. Hence in the near future the company might not make profits, I guess.
Even some experts told that, the share price would soon come to its IPO price levels.
All the above facts which I wrote are based on the comments made by the Ola EV scooter owners, news reports, and opinion of various market experts. I don't have any intention to harm the interest of the company [Ola Electric], its shareholders, other stake holders, and interested people of the company. I told these things just from an investment perspective only. I just want to inform about the risks associated with the stock. So, I'm not for or against the company's products.
Disclaimer:
Since I said about the share of the company, if you feel to sell the shares [if you hold it already], I request the readers to consult a SEBI registered advisor before selling the shares or do your own research before selling the shares. I just shared everything above just for an information purposes only.
Post a Comment