As expected, Ola Cabs has shown "EBITDA Profitability" in FY24 as a run up to its IPO. This is the second time it's pulling off this financial engineering stunt.
Even as Ola tried to dress up, the news showed an 11% decline in the Cab hailing biz with a net loss of ₹10 Cr at a revenue of ₹2012 Cr. I guess as far as PR is concerned, this was good as it could get. The actual, obvious, and perhaps uncomfortable truth however, is that the company needs to unload its shares to the public market FAST, so it could give an exit to its investors, majorly Softbank. Those people need to cash out.
Interestingly, Ola has somehow always been very close to "profitability", especially before knocking the IPO doors. The first time Mr. Aggarwal talked about profitability was when he said "Ola will be profitable in two years" back in 2017. I was at the event where he said that. The company then went on to post many years of thousand crore plus losses.
Then came 2020 and Mr. Aggarwal once again started touting Ola as "profitable". In fact, in FY21, Ola even showed an "operating profit" just before it was trying to launch its IPO. What happened then? The IPO market fizzled out and Ola took almost two years to reveal its FY22 financials, in which it showed a loss of ₹1522 Cr at a revenue of ₹1970 Cr. What an embarrassment.
Then came the time to report FY23 results. By this point, Mr. Aggarwal had shifted focus to Ola Electric, and thus stopping with the old "Ola is very profitable" routine. That year, the company went on to post a loss of ₹1082 Cr at a revenue of ₹2135 Cr. But then things got interesting. The IPO market started heating up again, and Ola Electric quickly got in the fray. I totally expected Ola Cabs to also start talking about "profitability", "electrification", "premiumisation" & other jazz before drumming its way into the retail markets.
Despite having made cumulative losses of over ₹21,000 Cr, I expected FY24 to be the "dress up" year for Ola. Which is exactly what the company tried to do. Retail investors ought to be very, very careful.
In the coming quarters, I expect Ola to go full ballistic on PR. Showcasing newfound "profitability" and "heightened prospects" in a "growing market". However, the truth is that all that's just old and boring trickery, being tried in the face of a reality which is super bleak to say the least.
In true terms, Ola Cabs is a cash guzzling, market share losing, $5 Bil mistake, which burned over ₹21,000 Cr, only to see new players like Rapido & Blusmart bite its rear. And of course, with Uber (making all its money in the west and planning to keep making losses in India) not going anywhere.
They say Ola will be going for a $5 Bil valuation. Interestingly, $5 Bil is also the amount it raised in its 15 year journey. While that's funny, what's funnier is that Vanguard marked Ola down to $2 Bil a few months ago.
Who's right? Who knows. All we know is LOVE has all the answers.
Speaking of love, I've released a new song: https://bit.ly/41hArk1
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