Vanguard downgrades valuation of Indian ride-hailing giant Ola by 52%.

Vanguard has significantly reduced its holding in Ola, an Indian ride-hailing startup, following a decrease in the company’s valuation. According to filings analyzed by TechCrunch, the asset manager marked down the worth of its shares in Ani Technologies, Ola’s holding firm, by 51.6%. As of May 31, Vanguard’s stake in Ola was valued at $25 million, down from $51.7 million purchased five years prior.

This valuation decline reflects a broader reduction in the company’s worth, dropping to approximately $3.5 billion as of early 2021, compared to its closing value of $7.3 billion in late 2021. Vanguard had previously valued its Ola shares at about $33.8 million at the end of February this year.

Ola, founded over a decade ago, has raised more than $3.9 billion through various funding rounds and equity financing. The company was last valued at $3.5 billion during an equity round in early 2017. Bhavish Aggarwal, one of Ola’s co-founders, has recently launched an AI startup focused on developing a large language model. Additionally, Aggarwal is actively scouting two U.S.-headquartered AI startups for potential acquisitions.

The situation is part of a growing trend where Indian startups face reduced valuations due to investor sentiment and broader market conditions. Invesco dropped Swiggy’s valuation by nearly half to $5.5 billion in January 2024, while Prosus cut the valuation of Byju’s, an Indian edtech giant, to about $5.1 billion. Fidelity also reduced its holding in SaaS startup Workable by over 60% last year.

The decline in Ola’s valuation comes as global markets remain uncertain due to geopolitical tensions and economic uncertainties. Investors are increasingly cautious about valuations for Indian companies, particularly those with high debt levels or limited growth prospects. This trend is likely to persist, forcing many startups to adjust their valuations accordingly.

Ola’s current valuation represents a significant drop compared to its peak in 2021. While the company continues to operate and generate cash flow, the reduced value signals a shift in investor sentiment toward riskier bets on Indian startups. Bhavish Aggarwal’s recent ventures highlight his growing interest in AI-driven solutions, which could potentially diversify the company’s offerings.

The situation is not unique to Ola but reflects a broader trend across the Indian startup ecosystem. Many startups are experiencing reduced valuations due to unfavorable market conditions and investor sentiment. This trend is likely to impact other companies as well, includingFlipkart, which saw its stock price drop by 3% last week after reporting weaker-than-expected earnings.

The impact of these valuation changes could also influence future funding rounds for Indian startups. Investors are increasingly cautious about valuations, leading to tighter terms and conditions in subsequent rounds. This trend is likely to continue, making it more challenging for many startups to secure funding as the cost of capital rises.

Bhavish Aggarwal’s recent moves highlight his ability to pivot and expand Ola’s offerings into new areas such as AI-driven solutions. His ventures could potentially complement Ola’s core business model, creating a more diversified portfolio that aligns with investor expectations for growth and stability.

The situation is also part of a broader trend in the Indian startup ecosystem, where valuations are increasingly uncertain due to market conditions and investor sentiment. This trend is likely to persist as global markets remain volatile, making it challenging for many startups to maintain their valuations.

In conclusion, Vanguard’s decision to cut its investment in Ola reflects the broader challenges faced by Indian startups in maintaining high valuations. While Bhavish Aggarwal’s recent ventures offer potential diversification opportunities, the overall trend underscores the need for caution and strategic planning among investors. The situation is part of a larger conversation about risk management and valuation in the Indian startup ecosystem, which will likely continue to evolve as markets remain uncertain.