Ola Electric IPO to Debut on 2Aug! Should you invest? Find out here.

The highly anticipated Ola Electric Mobility Ltd IPO is set to debut on 2 August 2024 and will make history of being the first-ever electric vehicle IPO in the Indian market. Additionally, it will break a twenty-year hiatus by being the first automobile IPO since Maruti in 2003. Ola Electric is currently one of the most promising startups in the EV sector. 

The ₹6,145.56 crore IPO is set to draw bids from Fidelity, Nomura and Norges Bank at the $4 billion (Approx ₹33,492 crores) valuation, as well as several Indian mutual funds, according to Reuters. 

The IPO of India’s biggest e-scooter maker is creating significant interest in the Indian financial markets, prompting investors to question: is this a prime investment opportunity or a potential misstep? Don’t worry-we’re here to break down the details to help you make an informed decision.

About the company

Ola Electric Mobility Ltd., founded in 2017, is a leading 2-W electric vehicle (EV) manufacturer based in India. The company is part of the larger Ola Group, which is renowned for its ride-hailing services. Ola Electric aims to revolutionize the EV market in India with its cutting-edge technology and sustainable solutions. With a mission to reduce carbon footprint and drive sustainable mobility, Ola Electric has garnered significant attention in the EV space. 

The company’s business model stands on three pillars –  

• R&D and Technology: In-house design and development of EV technologies and components. The company undertakes research and development (R&D) activities in India, the United Kingdom, and the United States focused on designing and developing new EV products and core EV components. 

• Production and Supply Chain: Adaptable manufacturing and logistics. The company produces EV components such as battery packs, motors, and vehicle frames, primarily at its Ola Futurefactory. It also assembles its EV scooters, at the same factory, using a combination of in-house manufactured components and parts sourced from third parties, such as cells. 

• DC Omni Channel Sales: Direct customer engagement through physical centers and online platforms. As of October 31, 2023, the company operates its omnichannel distribution network across India, comprising 870 experience centers and 431 service centers. The company uses its website for direct sales. 

The company is in the process of building their EV hub in Krishnagiri and Dharmapuri districts in Tamil Nadu, India, which includes their Ola Futurefactory, the upcoming Ola Gigafactory and co-located suppliers in Krishnagiri district. 

Currently, Ola Electric has a portfolio of 7 e-scooters and plans to foray into electric motorcycles with four new models.  

The company’s flagship model, the Ola S1 scooter, has been well-received in the market, contributing to its growing prominence. Within nine months of launching their first EV scooter in December 2021, the company became India’s top-selling E2W brand based on monthly registrations.  

As of July 27, Ola Electric held a 39% market share in the electric two-wheeler market, based on data from the government’s transportation portal Vahan. This represents a decline from its 46% share in June and a significant drop from the 58% share it held in May. 

It competes with major players like Bajaj Auto, Hero MotoCorp-backed Ather Energy, and TVS Motors, who are slowly increasing their share of the sales. 

Ola Electric IPO Overview

IPO Dates August 2 to August 6, 2024 Face Value ₹10 per share Issue Price 

Retail: ₹72 to ₹76 per share (upto ₹2 lacs) 

Employee: ₹65 to ₹69 per share (upto ₹2 lacs) 

HNI: ₹72 to ₹76 per share (₹2-5 lacs) 

Minimum Investment: ₹14,820 (195 shares) for retail

Issue Size: ₹6,145.56 crore 

• Fresh issue of ₹5,500 crore (723,684,210 shares) 

• Offer for sale (OFS) ₹645.56 crore (84,941,997 shares) 

Listing Exchange BSE and NSE Promoters Bhavish Aggarwal, Ankit Bhati 

IPO timeline

IPO Objective

As per the DRHP filed by the company, the net proceeds from the IPO are proposed to be utilized in the following manner: 

• Expansion: Scale up production facilities and enhance R&D capabilities. 

• Debt Repayment: Reduce existing debt levels to strengthen the balance sheet. 

• Product Development: Invest in the development of new models and technologies. 

• Market Expansion: Increase market penetration both domestically and internationally. 

IPO Strengths

• Innovative Product Line: Ola Electric’s strong portfolio of electric scooters and upcoming electric cars positions it as a leader in India’s burgeoning EV market. 

• Technological Edge: The company boasts cutting-edge battery technology and advanced software, giving it a competitive advantage in terms of performance and range. 

• Strong Brand and Market Presence: Backed by Ola’s established brand and extensive customer base, Ola Electric benefits from significant market visibility. 

• Sustainable Growth: With increasing government incentives for EVs and growing environmental awareness, Ola Electric is well-positioned for sustainable growth. 

• Experienced Management Team: Led by founders with a proven track record in the tech and mobility sectors, the company is guided by a seasoned management team. 

IPO Risks

• Loss Making with Short History: IPO timeline  Ola Electric Mobility has a relatively short operating history and has registered losses and negative cash flows. The company’s loss before tax was ₹786.15 crore in FY22, ₹1,478.20 crore in FY23, and ₹5,364.40 crore in FY24. 

• Regulatory Changes: Changes in government policies or regulations regarding EV incentives and subsidies could impact profitability. 

• Intense Competition: The EV market is highly competitive, with numerous players entering the space and incumbent players aggressively building their market share, which could affect market share and margins of Ola Electric. 

• Production Challenges: The expansion of the Ola Future factory might face delays, disruptions, or cost overruns. Additionally, there’s a risk that these expansions may not yield the anticipated benefits, potentially impacting the company’s production capacity, financial health, and operational results. 

• High Debt: As of June 15, 2024, the company’s debt stood at ₹2,675.18 crore. Any failure to service or repay these loans could negatively impact the company’s operations. 

• Technological Risks: Reliance on new technologies may expose the company to risks related to technological failures or obsolescence. 

• Market Volatility: The EV sector can be volatile, influenced by fluctuations in commodity prices, particularly for battery materials. 

Peer Companies

• Tata Motors Limited (Electric Vehicle Division) 

• Mahindra & Mahindra Ltd. (Electric Vehicle Division) 

• Hero-motor backed Ather Energy Pvt. Ltd. (unlisted) 

💸 Financials 

Book Running Lead Managers 

The book-running lead managers to the offer are Kotak, Citi, BofA Securities, Goldman Sachs, Axis, I-Sec, SBICAP and BOBCAPS. 

Valuation & should you invest?

Ola’s margins are expected to improve post integration of its in-house cell since it will be saving on the margins of the companies from which it imports batteries. Cell PLI will come when commercial production starts and it will also get 13-18% production-linked incentives (PLI) on production of 2 models of electric scooters.

Ola is the market leader with ~50% market share in electric 2w as of April’24. We believe that if the EV story sustains and drives demand, Ola could be one of the biggest beneficiaries. Ola’s battery business can have more potential that its scooter business since surplus capacity after captive consumption could be deployed for various uses. With a valuation of 6.6x Market Cap/Sales, we recommend to ‘Buy for Listing Gains’.

Final takeaway 

At the upper price band of ₹76, the current IPO is valued approximately 25% lower than Ola’s last funding round in September. This round, led by Singapore’s investment firm Temasek, had valued the EV maker at ₹45,214.2 crores ($5.4 billion).  

Ola Electric’s IPO presents an exciting opportunity for investors looking to tap into the rapidly growing electric vehicle market. With a strong technological edge, an innovative product lineup, and a solid growth strategy, the company is well-positioned to capitalize on the increasing shift towards sustainable mobility.  

The biggest red flag for the company is that it is a loss-making company entity. On the positive, the company has been seeing strong growth in its revenues and is set to launch new bikes. 

However, potential investors should weigh the associated risks, including regulatory changes and market competition, before making an investment decision. 

If you’re interested in the future of transportation and believe in the potential of electric vehicles, Ola Electric’s IPO might be worth considering for your investment portfolio.

Apply for the IPO Now

Learn more about Ola Electric IPO in the following video:

 

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