The Union Budget 2024-25 introduced key changes for the electric vehicle (EV) industry. Among these, customs duty exemptions on lithium promise to ease production costs, hinting at cheaper EV prices for consumers.
Against this backdrop, Ola Electric, which proposed its initial public offering (IPO) on December 22, 2023, is now open for subscription and will close on August 6.
The IPO news has been making noise for a while now, and here’s a chance for you to learn everything about it.
Who is Ola Electric?
Ola Electric is a popular brand manufacturing and selling electric two-wheelers in India. Founded by Bhavish Aggarwal, Ola is headquartered in Bengaluru, India and is the country’s largest manufacturer of electric two-wheelers.
History
It was in 2017 when the founder of Ola Cabs, Bhavish Aggarwal, noticed increased emissions and dependency on fuel for cabs. To reduce dependency, Ola Electric was established under ANI Technologies (Ola Cab’s parent company).
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After a successful pilot program, Ola Electric was all set to go live in the market in 2021. The company set up the largest two-wheeler factory in Tamil Nadu and was ready to take orders in 2021. In the first month, Ola received 5,00,000 bookings.
Objective and vision
The company’s objective is to create a revolution in the electric vehicle industry and bring more sustainability to transportation.
Ola’s vision is to unite young, brilliant minds and shape the global electric vehicles’ future.
Ola today
Today, Ola Electric is famous and spotted quite frequently on the road. As of 2024, it has six EV scooter variants, ranging from an approximate cost of ₹80,000 to ₹1,50,000. Plus, four more EV motorcycles are als announced. In Fiscal 2024, the brand emerged as a leading seller in the Indian electric two-wheeler (E2W) market, capturing approximately 35% of total E2W registrations.
Ola Electric’s business model stands on three pillars. First, their R&D platform drives in-house innovation in EV technologies. Second, an adaptable manufacturing and supply chain platform ensures efficient production. Third, a D2C omnichannel distribution platform integrates sales, service, and charging facilities. This approach covers every aspect from technology and manufacturing to customer interaction and support.
Ola Electric’s financials
| Particulars | FY 2024 (₹ crore) | FY 2023 (₹ crore) | FY 2022 (₹ crore) |
| Revenue from operations | 5009.831 | 2630.927 | 373.423 |
| Expenses | 6277.411 | 3883.375 | 1173.812 |
| Loss for the year | -1584.4 | -1472.079 | -784.150 |
| EPS – Basic (₹) | -4.35 | -3.91 | -2.23 |
| Return on networth (%) | -78.46 | -62.47 | -21.42 |
| Net Asset Value per share (₹) | 5.54 | 6.26 | 10.43 |
| EBITDA | -1040.191 | -1197.098 | -717.552 |
Source: Ola Electric RHP
Ola Electric’s IPO details
| Particulars | Details |
| IPO start date | August 2, 2024 |
| IPO end date | August 6, 2024 |
| Price band | ₹72-₹76 |
| Lot size | 195 shares |
| Face value | ₹10 per share |
| Total issue | ₹6145.56 crores |
| Fresh issue | ₹5500 crores |
| Offer for sale | ₹645.56 crores |
| IPO reservations | 75% – Qualified Institutional Buyers (QIB)15% – Non-Institutional Buyers (NIB)10% – Retail investors |
Source: Ola Electric RHP
Also read: Financing your next car purchase? India’s auto finance sector and lenders
Shareholding pattern
| Name of the shareholder | Shareholding percentage |
| Bhavish Aggarwal | 36.94% |
| SVF II Ostrich (DE) LLC | 21.98% |
| OEM Employees Welfare Trust | 7.67% |
| Internet Fund III Pte Ltd | 6.03% |
| ANI Technologies Private Limited | 4.35% |
| Indus Trust | 3.85% |
| Alpha Wave Ventures II, LP | 3.49% |
| Matrix Partners India Investments III, LLC | 3.43% |
| Hyundai Motor Company | 2.95% |
| V-Sciences Investments Pte Ltd | 1.78% |
| MacRitchie Investments Pte Ltd | 1.25% |
Source: Ola Electric RHP
Fund utilisation plan
The entire proceeds received from the offer for sale will be used to pay the selling shareholders after deducting expenses related to the public offer.
Following are the estimates proposed to use funds received through the fresh issue:
- ₹12,26.427 crore will be invested in capital expenses for Ola’s subsidiary, Ola Cell Technologies Private Limited.
- ₹800 crore will be used to repay the debts of another subsidiary, Ola Electric Technologies Private Limited, either partially or fully.
- ₹1600 crore will be directed towards research and development of products.
- ₹350 crore will be used for various initiatives towards Ola Electric’s organic growth.
- The remaining funds based on the subscription will be used for other general corporate purposes.
Is Ola’s IPO for you?
The electric vehicle segment in India is booming. More and more riders are turning towards these vehicles to contribute to a healthier environment. Given the growth prospects and rising demand, owning stocks in the electric vehicle sector might be a wise addition to one’s portfolio today. However, let’s deep dive into Ola’s strengths and risks to know if Ola’s stocks fit your portfolio.
| Company | Revenue from operations for FY 2024 (₹ crore) | EPS – Basic (₹) | Return on Net Worth % | NAV per share (₹) | P/E ratio |
| Ola Electric | 5009.831 | -4.35 | -78.46 | 5.54 | NA |
| TVS Motors | 39144.74 | 35.5 | 23.68 | 158.1 | 68.99 |
| Eicher Motors | 16535.78 | 146.18 | 22.17 | 659.06 | 33.58 |
| Bajaj Auto | 44870.43 | 272.7 | 26.61 | 1,037.41 | 34.02 |
| Hero MotoCorp | 37788.62 | 187.36 | 20.98 | 892.08 | 28.89 |
Source: Ola Electric RHP
Take a chance, because:
- The electric two-wheeler market in India is currently growing. According to a report by Redseer, 5.4% of the registered two-wheelers on the VAHAN portal were electric in 2023. The percentage is expected to reach 41-56% by 2028. Ola Electric is a company purely focusing on manufacturing electric vehicles and is presently a market leader in that category. 38% (FY24) of the electric two-wheelers sold in India belonged to Ola Electric, making it the largest EV seller in the country.
- Besides a highly skilled management team, Ola has a potent research and development team, with over 959 employees, some of whom are PhD holders. The company prioritises research and development to improve the quality of vehicles and update them with the latest technologies. The company’s increasing trend towards R&D expenditure proves their effort in this direction.
| Year | R&D expenses (₹ crore) |
| 2022 | 175.84 |
| 2023 | 507.711 |
| 2024 | 385.11 |
Source: Ola Electric RHP
- Ola’s manufacturing facility in Tamil Nadu, called Ola Futurefactory, is the largest electric two-wheeler manufacturing facility in India. With in-house designs and technologies for manufacturing EV components, Ola can achieve economies of scale and optimise the performance of vehicles.
- The company follows a direct-to-customer sales model, helping Ola establish direct contact with customers. This increases the customer’s experience and helps the company manage client feedback effectively. Ola has over 870 experience centres nationwide, showcasing the company’s customer-centric approach.
- Ola is eligible for various government incentive schemes. The company and its customers are qualified for subsidised rates under these schemes, giving a cost advantage to both parties.
Also read: The role of the energy sector in powering India’s growth
Watch out for:
The increasing demand for electric vehicles has led to a rise in the number of companies entering the field. Given the high competition rate, it may be difficult for one brand to continue standing at the top of the chart for a long time.
- Despite Ola Electric’s increasing revenue, the company is burning cash. Ola expects to incur losses for the next few years as most of the revenue is spent on the company’s expansion.
- Electric vehicles are technical machines which can break down due to manufacturing defects. These vehicles use lithium-ion cells, which can catch fire. There was an incident in Pune where an Ola two-wheeler caught fire. Such incidents can impact the company’s brand image adversely.
- Any reduction in government subsidies for Ola’s vehicles increases the vehicle’s cost, affecting the demand for Ola’s two-wheelers.
- Ola Electric focuses on making electric two-wheelers alone, restricting its product portfolio. Due to the lack of diversity, the company’s operations may suffer if consumer preferences change.
- The company needs to be on its toes to assess the changing preferences of consumers every day and update its products accordingly. Failure to do so will put the brand behind in the race.
Bottomline
Every industry in the country is currently turning towards sustainability. The growth of electric vehicles is an effort towards that. While it seems like the right time to invest in the stocks of an electric vehicle brand, it is essential to consider the risks involved, too.
