Trystan Casey
Ola Electric Mobility Limited is a pure electric vehicle (EV) company based in India. The company has opened its initial public offering (IPO) for bidding on 2nd August 2024, with a price band of Rs 72-76 per share. The IPO aims to raise approximately Rs 6,000 Crore, which will be utilised for expanding manufacturing capabilities, research and development, and strengthening its charging infrastructure. While some analysts are positive about the company's growth prospects, market leadership, and integrated manufacturing facility, others highlight concerns about its financial performance, profitability, and government policy shift. With the increasing demand for sustainable transportation solutions, Ola Electric's IPO offers an opportunity to invest in the expanding EV sector. However, investors should carefully consider the risks and rewards before making any investment decisions.
| Characteristics | Values |
|---|---|
| IPO Date | 2nd August 2024 to 6th August 2024 |
| Face Value | Rs. 10 per share |
| Price Band | Rs. 72-76 per share |
| Lot Size | Minimum of 195 or 197 shares and multiples thereof |
| Listing | Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) |
| Share of IPO for QIB | 75% |
| Share of IPO for NII | 15% |
| Share of IPO for Retail Investors | 10% |
| Total Amount to be Raised | Rs. 6,000 Crore or Rs. 6,146 Crore |
| Utilisation of Funds | Expand manufacturing capabilities, enhance research and development, and strengthen charging infrastructure |
| Risks | Lack of experience in producing EVs, steep competition, weak financials, quick cash burn, mounting losses, volatility due to government policy shifts |
| Key Investors | Softbank |
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What You'll Learn
Ola Electric IPO's fundamentals and profitability concerns
Ola Electric's IPO fundamentals and profitability concerns are important factors for investors to consider. The company aims to raise approximately Rs 6,000 Crore through the IPO, which will be utilised for expanding manufacturing capabilities, R&D, and enhancing its charging infrastructure. While Ola Electric has a strong market presence and ambitious growth plans, there are concerns about its profitability and business model.
One of the major red flags is the company's financial model, which has shown aggressive expansion without a clear path to profitability. Ola Electric has engaged in heavy spending on marketing, R&D, and aggressive discounting, leading to mounting losses. The company struggled with negative cash flows, unprofitable unit economics, and a high debt burden, straining its financial stability. The high dependency on subsidies and government incentives has also impacted the sustainability of its pricing model.
Additionally, Ola Electric's short experience in producing EVs and its reliance on foreign countries for raw materials and components present risks. Disruptions in supply or increases in prices of these materials may affect the company's manufacturing and delivery timelines and impact customer demand. The company has also faced execution risks in new ventures, with announcements of expansions into motorcycles and battery tech before establishing financial stability.
Ola Electric's IPO subscription data revealed misplaced investor confidence, with high volatility post-listing suggesting speculative trading. The company's downfall post-IPO highlights the importance of cautious investment decisions, considering the risks and profitability concerns associated with new-age companies entering the market.
Despite these concerns, some analysts find comfort in the stripped-down valuations of Ola Electric at the IPO stage. The company's innovative products, strong market presence, and growth plans in the expanding EV sector present a compelling investment opportunity for those interested in the potential future growth of the company.
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The company's short experience producing EVs
Ola Electric Mobility Limited is a relatively new company, founded in 2017 by Bhavish Aggarwal. It designs and manufactures electric two-wheelers, including the Ola S1, which has three variants: the Ola S1 Air, Ola S1X, and S1 Pro. The company also produces battery cells at its manufacturing facility in Tamil Nadu, supplying energy storage solutions for its vehicles and other applications.
Ola Electric has had a short experience producing EVs. The company manufactured its first electric scooter on 15 August 2021, and by January 2022, it was producing nearly a thousand electric scooters daily. In March 2023, following criticism over safety defects in its front fork design, Ola Electric offered to replace the front fork arms of its S1 and S1 Pro series scooters free of charge.
The company has faced some challenges, including a hostile work culture that surfaced in 2022 and a fire incident in one of its scooters in Pune in March 2022, leading to the recall of 1,441 scooters. Despite these setbacks, Ola Electric has made significant progress in the EV market. As of 2023, the company led the electric scooter market in India with a 30% share.
Ola Electric has raised significant capital from investors, including Falcon Edge, SoftBank Group, and Temasek. It has also made strategic investments in battery technology companies to enhance its EV capabilities. The company has ambitious growth plans, aiming to expand its manufacturing capabilities and enhance its research and development.
While Ola Electric has a short experience producing EVs, it has made rapid progress and established itself as a leading player in the Indian market. The company's innovative products, strong market presence, and ambitious growth plans make it well-positioned to benefit from the increasing demand for sustainable transportation solutions. However, as with any investment, there are risks involved, and investors should carefully consider these before making any decisions.
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IPO allocation and bidding process
The Ola Electric IPO bidding process started on August 2, 2024, and ended on August 6, 2024. The allotment for the IPO was finalized on August 7, 2024. The IPO aimed to raise approximately Rs 6,000 Crore, with a price band in the range of Rs 72-76 per share. The minimum bid was for 195 shares, and investors could bid in multiples of 197 shares thereafter. The minimum investment amount required was Rs 14,040, but it was suggested that investors bid at the cutoff price of Rs 14,820 to avoid oversubscription.
To participate in the IPO bidding process, investors could follow these steps:
- Open an HDFC Sky Account: Sign up online and log in to HDFC Sky.
- Apply for the IPO: Find and select the OLA Electric IPO.
- Place Your Bid: Enter the desired number of shares and price, or choose the cut-off price.
- Invest with One Click: Use your UPI ID to block the funds.
- Confirm and Submit: Review and submit your application; funds will be blocked until stocks are allotted.
- Allotment: If allotted, shares will be credited to your Demat account and listed on BSE and NSE for trading.
It is important to note that investors should conduct thorough research and analysis before making any investment decisions. IPO allocation is typically done based on the number of shares available and the demand from different categories of investors. In the case of Ola Electric IPO, 75% of the shares were set aside for qualified institutional buyers (QIB), 15% for non-institutional institutional investors (NII), and 10% for retail investors.
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Ola Electric's market share and competition
Ola Electric Mobility Limited is an electric vehicle company that manufactures electric vehicles and core components for electric vehicles, including battery packs, motors, and vehicle frames. The company is the largest e-scooter manufacturing company in India, with 31% of the market share in the E2W sector, selling 329,618 scooters in FY24. However, Ola Electric has faced competition from legacy two-wheeler giants like Bajaj Auto and TVS Motor, as well as the startup Ather. This competition, coupled with piling customer complaints, has led to a rapid fall in sales.
Ola Electric received a valuation of $3 billion within the first five years of its launch and secured backing from prominent investors like American venture capital firm Tiger Global and Japanese investing giant SoftBank. The company aimed to lead the EV market in India, which is projected to become a world leader in the sector by 2030. Ola Electric's e-scooter manufacturing facility in Tamil Nadu claimed to have an annual capacity of 1 million units as of March 2024.
Out of the 1.14 million electric two-wheelers sold in India in 2024, Ola produced 407,673, capturing a market share of 35%. However, the company's sales have slumped, with only 8,647 Ola scooters registered in February 2025, down from nearly 34,000 a year earlier. Ola Electric's stock price plummeted more than 60% from its peak in August 2024, as customer complaints against its scooters mounted.
The company's financials remain in the red, with shrinking margins and a low interest coverage ratio. While Ola Electric has a strong market presence and ambitious growth plans, its experience producing EVs is limited, and there is no guarantee that it will be successful or cost-effective in the future.
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IPO risks and rewards
Risks
Ola Electric IPO has set aside 75% of its shares for qualified institutional buyers, 15% for non-institutional institutional investors, and only 10% for retail investors. The company's experience producing EVs is limited, and there is no guarantee that they will be successful or cost-effective in the future.
Ola Electric's weak financials, expansions at break-neck speed, and quick cash burn with mounting losses are also big risks for investors. The company's IPO is one of the largest after Zomato and Paytm, which performed badly in the secondary markets with severe value erosion for shareholders.
There are also concerns about volatility stemming from government policy shifts, the dependency of raw materials on foreign countries, and disruptions in supply or an increase in prices of components used to manufacture electric vehicles.
Rewards
The Ola Electric IPO offers a compelling investment opportunity in the expanding EV sector. With its innovative products, strong market presence, and ambitious growth plans, Ola Electric is well-positioned to benefit from the increasing demand for sustainable transportation solutions.
Ola Electric Mobility Limited's revenue increased by 88.42% between the financial year ending March 31, 2024, and March 31, 2023. Despite being a loss-making company, it captured a market share of 40% in FY24 and aims to maintain market share through tech and launches.
The IPO aims to raise approximately Rs 6,000 Crore, which will be utilised for expanding manufacturing capabilities, enhancing research and development, and strengthening the company's charging infrastructure.
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Frequently asked questions
Ola Electric Mobility Limited is a pure electric vehicle (EV) company in India that is developing vertically integrated technology and manufacturing capabilities for EVs and EV components. The company's initial public offering (IPO) was open for subscription from Friday, August 2, 2024, to Tuesday, August 6, 2024.
There are several risks to consider before investing in the Ola Electric IPO. Firstly, the company has a limited operating history in manufacturing EVs, and there is no guarantee that it will be cost-effective or profitable in the future. Secondly, the company has reported losses in each of the last three fiscal years, and its heavy investment in R&D may not yield immediate returns. Additionally, any changes in government incentives or policies could adversely affect customer demand and the company's ability to achieve profitability.
Ola Electric is well-positioned to benefit from the increasing demand for sustainable transportation solutions. As the largest E2W seller in India, the company has a strong market presence and is in a high growth phase. With its innovative products, robust R&D capabilities, and eligibility for EV-related government incentives, Ola Electric has the potential for long-term growth and profitability.
To invest in the Ola Electric IPO, you can follow these steps:
- Open an HDFC Sky Account by signing up online and logging in.
- Apply for the IPO by finding and selecting the Ola Electric IPO.
- Place your bid by entering the desired number of shares and your preferred price, or choose the cut-off price.
- Invest with One Click by using your UPI ID to block the funds.
- Review and submit your application; your funds will be blocked, and if allotted, the shares will be credited to your Demat account and listed on BSE and NSE for trading.
