Case 023Long pitches and valuationCore

Voltrail Charging wants to justify a valuation of Rs 3,000 crore. Size its market: 20 lakh electric cars in its region, 30% of charging done at public stations, 2,000 kWh charged per car a year and a margin of Rs 4 per kWh. What EBITDA pool exists, and what share must Voltrail win?

The situation

Voltrail Charging runs public fast-charging stations for electric cars and is about to list at a valuation of Rs 3,000 crore. Similar infrastructure businesses trade at about 15x EBITDA. Its region has 20 lakh electric cars today. Owners do about 30% of their charging at public stations and the rest at home or work.

An average car draws about 2,000 kWh a year. After paying for electricity, site rent and maintenance, a public charger earns about Rs 4 of EBITDA per kWh sold. A portfolio manager asks whether the valuation is plausible.

Your task

How big is the EBITDA pool from public charging, what share must Voltrail win to justify Rs 3,000 crore, and what would you push on?

Quick check

What share of the regional public charging profit pool does Voltrail need to justify Rs 3,000 crore at 15x?

Worked solution

Try it on paper, then open one step at a time.

30-second answerThe answer to give first

The whole regional public charging market earns about Rs 480 crore of EBITDA today, and Voltrail needs Rs 200 crore of it, about 42%, to justify Rs 3,000 crore at 15x. Twenty lakh cars times 30% public times 2,000 kWh is 120 crore kWh; at Rs 4 a kWh, Rs 480 crore. On today's fleet the valuation needs near-dominance. It becomes plausible only if the fleet grows several times over, so the pitch is really a fleet growth and margin call.

Step 1How big is the pool?

Build it from the unit that earns money, a kWh sold, and multiply out loud so each assumption can be challenged. Twenty lakh cars, 30% of their charging in public, 2,000 kWh a car: 120 crore kWh a year through public chargers, and at Rs 4 of EBITDA each, a pool of Rs 480 crore for every operator in the region together. It is the same arithmetic as sizing tea stalls at a railway station: passengers, times the share who buy, times cups, times the margin on a cup.

From cars to a profit pool: the whole market earns Rs 480 crore20 lakhelectric carsx 30%charged in publicx 2,000 kWh= 120 crore kWhx Rs 4= Rs 480 crore poolVoltrail's Rs 3,000 crore valuation at 15x EBITDA needs Rs 200 crore of EBITDA:Voltrail needs 200: 41.7%every other charger: 280Rs crore a year of EBITDA from public charging in the region, at today's fleet.
Twenty lakh electric cars, 30% of charging done in public and 2,000 kWh a car give 120 crore kWh a year; at Rs 4 of EBITDA a kWh the regional pool is Rs 480 crore, of which Voltrail needs Rs 200 crore, 41.7%, to justify Rs 3,000 crore at 15x.
Step 2What share does the valuation need, and is that plausible?

Rs 3,000 crore at 15x EBITDA is Rs 200 crore of EBITDA. That is 41.7% of all public charging profit in the region, in a business where sites compete on location and drivers switch to whichever charger is nearest. Forty per cent of a fragmented, location-driven market is dominance, not leadership. So on today's fleet the valuation is hard to defend, and the interesting question becomes what the price assumes about tomorrow's.

Step 3What if the fleet grows, and what else moves the answer?

The pool scales with the fleet. At 40 lakh cars Voltrail needs 21% of the pool, at 60 lakh 14%, and at 1 crore cars only 8%, so the valuation is really a bet that the fleet grows several times over while Voltrail holds its position. Two inputs push the other way. If home charging spreads and the public share falls to 20%, Voltrail needs 62% of today's pool. If competition cuts the margin to Rs 3 a kWh, it needs 56%. Each is as likely as the fleet growth the bull case relies on.

The valuation is a bet on the fleet growing, not on today's market10%20%30%40%50%20 lakh40 lakh60 lakh80 lakh100 lakhElectric cars in the regionShare of the pool needed for Rs 200 crore41.7%20.8%13.9%8.3%today
Voltrail needs 41.7% of the public charging pool on today's fleet of 20 lakh cars, falling to 20.8% at 40 lakh, 13.9% at 60 lakh and 8.3% at 1 crore cars, so the valuation rests on fleet growth.

Close with what you would push on. Ask for Voltrail's own kWh sold per charger and its utilisation, because a market share claim should reconcile to the unit economicsRevenue and cost measured per unit of what the business sells, here per kWh or per charger, so that growth can be checked against the cost of delivering it. of its sites. Then give the view: at Rs 3,000 crore the market is paying today for a fleet that does not yet exist, so the stock is a long only for someone with a specific reason to expect faster adoption and margins that hold.

Where candidates lose it

The trap is sizing the market in revenue or in kWh and comparing it with the valuation directly, or counting all charging instead of public charging. The valuation is a multiple of EBITDA, so the pool has to be EBITDA too, and home charging earns Voltrail nothing.

The second is stopping at 42% and calling the stock overvalued. The interviewer wants the next step: what fleet size and margin would make the price reasonable, and how likely they are.

What the interviewer asks next

  • What fleet size makes Voltrail's required share a more ordinary 15%?
  • How would highway chargers, with higher margins and lower utilisation, change the pool?
  • Which single data point in Voltrail's listing document would you check first?

Company names and figures are illustrative.