Ola Electric Mobility Ltd IPO | News | Overview | Verdict

IPO listed on 9 Aug'24

Ola Electric Mobility Ltd

Minimum Investment

₹ 14,820 / 195 shares

Grey market premium

₹ 12 (16% premium)

Issue price

₹ 76

Listing price

₹ 76

Listing gains

Listing on

Aug 9, 2024

Our Verdict:

Avoid

Ola Electric Mobility Ltd, as India’s only pure play electric two-wheeler (E2W) player, holds over 35% of the market share. Given the current 15% EV scooter penetration and the overall EV market penetration at just 5.4%, the potential for growth appears significant.
Despite this, there are notable concerns. Over the last two years, the company's losses have more than doubled from Rs 784 crore in FY22 to Rs 1,584 crore in FY24. Management has indicated that losses may persist in the short term due to ongoing investments in business expansion.
Additionally, Ola Electric has been offering substantial discounts up to Rs 25,000 on its flagship Ola S1 model. However, as the push towards profitability intensifies, these discounts may need to be reduced, potentially affecting demand.
The estimated market cap-to-sales ratio for Ola Electric stands at 6.7 times, substantially higher than established competitors like TVS Motor Ltd (3.5 times) and Hero MotoCorp Ltd (2.8 times), which brings Ola Electric's valuation into question.
Given these factors, long-term investors may prefer to wait and monitor the company's performance over the next two quarters, as the inherent risks currently outweigh the potential benefits.

About the company

Founded in

3 Feb'17

Managing director

Bhavish Aggarwal

Ola Electric is India's largest producer of E2W, with a focus on manufacturing EVs and essential components such as battery packs, motors, and vehicle frames at the Ola Future factory. This facility is recognized as India's largest dedicated E2W manufacturing site in terms of production capacity as of March 31, 2024, and has an annual capacity to produce one million units.
In addition to this, Ola Electric operates a Battery Innovation Center (BIC) in Bengaluru, which focuses on pioneering advancements in cell and battery technologies to support the next generation of EVs.

STRENGTHS

Dominant Market Presence: In FY24, Ola Electric secured a substantial 35% market share in the Electric Two-Wheeler (E2W) sector, surpassing competitors like TVS Motor at 19%, Bajaj Auto Ltd at 11%, and Hero MotoCorp at 2%. Within just nine months after launching its first EV scooter in December 2021, Ola Electric emerged as the top-selling E2W brand in India based on monthly E2W registrations.
Remarkable Growth Trajectory: Ola Electric has exhibited exceptional growth over recent years. The sales volumes of its scooters surged by 2.1 times to 330,000 units in FY24, following a sevenfold increase the previous year. This rapid growth is also mirrored in the company's revenue, which nearly doubled to Rs 5,009.8 crore in FY24 after a 605% increase in the prior year.
Favourable Industry Trends: Electric two-wheelers are expected to comprise approximately 41-56% of domestic two-wheeler sales by FY28. With Ola Electric's continued growth, market leadership, and expansion plans, the company is strategically positioned to leverage these upcoming opportunities.

RISK FACTORS

Loss-Making Company: Ola Electric and its material subsidiaries, Ola Electric Technologies (OET) and Ola Cell Technologies (OCT), have experienced losses and negative cash flows from operations since their inception, and it may take some time before they achieve profitability.
Limited Experience: Ola Electric’s experience in manufacturing electric vehicles (EVs) is relatively limited. There is no guarantee that the company will manage its operations cost-effectively or become profitable in the future.
High Dependence on a Single Product: A significant portion of the revenue, specifically 59.62% in FY24, comes from sales of the Ola S1 Pro model. This dependence on a single product makes the company vulnerable to risks such as demand fluctuations or intensified competition for this model.
Employee Retention and Order Cancellations: Ola Electric faces significant challenges with high employee turnover, with an attrition rate of 44.25% in FY24, and increasing order cancellations, which stood at 9.14% of fully paid and confirmed orders. These issues may indicate broader problems with employee retention and customer satisfaction.
Customer Complaints: In FY24, Ola Electric received 2,994 customer complaints regarding product quality and 1,742 complaints about vehicle servicing. Failures to meet performance expectations or operational defects in EVs could lead to a loss of business and damage the company’s reputation.
Reliance on Imported Supplies: In FY24, 36.86% of the materials used were imported from China. Any political tensions leading to delays, interruptions, or increased costs in the supply of raw materials could adversely affect the business.

Issue details

Issue type

Mainstream

Issue size

₹ 6,145.56 crore

Fresh Issue

₹ 5,500 crore

OFS

₹ 645.56 crore

Price range

₹ 72 - 76

Lot size

195 shares

Issue Objective

Ola Electric plans to utilise the net proceeds from the fresh issue for the following purposes:

Expand the capacity of its cell manufacturing plant from 5 GWh to 6.4 GWh through capital expenditures incurred by its subsidiary, OCT;
Repay or pre-pay, either fully or partially, the debts accumulated by its subsidiary, OET;
Invest in research and product development to innovate and improve its offerings;
Allocate funds for initiatives aimed at organic growth; and
General corporate purposes.

Dates

Bidding open

2 Aug'24

Bidding close

6 Aug'24

Allotment date

7 Aug'24

Refund date

8 Aug'24

Listing

9 Aug'24

IPO Reservations

Qualified institutional buyers

>75%

Non-institutional investors

<15%

Retail individual investors

<10%

Read the Offer Document

This document has been issued by Liquide Solutions Private Limited for information purposes only. It does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek personal and independent advice regarding the appropriateness of investing in any of the funds, securities, other investment or investment strategies that may have been discussed or referred herein and should understand that the views regarding future prospects may or may not be realized. In no event shall Liquide Life Private Limited and / or its affiliates or any of their directors, trustees, officers and employees be liable for any direct, indirect, special, incidental or consequential damages arising out of the use of information / opinion herein.

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