Deven Choksey, managing director of brokerage DRChoksey FinServ, said mutual funds have been adding Ola Electric to their portfolios. “As the funds are sitting in a pool of cash, for them to buy new ideas in a portfolio is just a simple ask,” said Choksey. “Further, funds have exhausted limits to buy existing ideas for the want of managing the weight.”
Ola’s share performance post listing is like that of other new age companies like Zomato and Nykaa, which more than doubled after their debut.
“We have seen that new age companies initially get a lot of hype but have taken a lot of time for the shares to recover to their IPO price after they fall,” said Apurva Sheth, head of research at Samco Securities. “The stock has seen significant run-up based on expectations in the last two weeks, and the margin of safety is lower now.”
Sheth advises investors to book profits and wait for better buying opportunities. The market capitalisation of Ola stood at INR 60,000 crore on Wednesday. The market value of its more established rivals Hero Motocorp and Bajaj Auto stood at INR 1.05 lakh crore and INR 2.75 lakh crore respectively.
“At INR 60,000 crores of market cap, Ola Electric remains an expensive proposition. It needs to build the visibility of INR 9,000 crore-INR 10,000 crore of profits to justify the market valuations,” said Choksey. “I would prefer, buy on dips with a minimum holding of 3 5 years in this business.” Mehrotra has also advised investors to refrain from fresh buying. “With the current EV (Enterprise Value)/Sales multiple on a steeper side of around 8 times, we remain cautious from a fundamental perspective,” said Mehrotra.
Ola Electric Mobility has been on a roll since its stock market debut two weeks ago, defying analysts' expectations of a reversal in the share price soon after the company's listing.
The stock has soared nearly 82% since August 9 - its listing day - fuelled by optimism over its recent vehicle launches and institutional purchases. The surge in the stock price has made analysts even more wary about its prospects.
Ola shares listed at INR 76 - the IPO price - on the exchanges, after which they jumped 20% to the highest tradable limit of the listing day. Subsequently, the stock more than doubled to a high of INR 157.4 on Tuesday. It closed flat at INR 137.91 on Wednesday.
"Despite a subdued start on the stock market, Ola Electric Mobility gained traction due to its long-term growth potential," said Akriti Mehrotra, research analyst at StoxBox. "The introduction of new models (announcement made post listing) to its line-up has also helped the stock gain momentum."
The pace of run-up in the share price came as a surprise to many on Dalal Street as analyst commentaries suggested the IPO valuations factored in most of the optimism around the company's business model.
Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.
