“People remember how Maruti [Suzuki India] grew after its IPO (initial public offering), so we wanted to bring that for the public investors, to be part of our journey if they wish to,” Bhavish Aggarwal, Founder of Ola Electric Mobility, said in a recent podcast, drawing a comparison to Maruti’s IPO 20 years ago. Market analysts, however, think that Ola Electric Mobility, which is hitting the capital markets soon, must reach profitability first.
This will be the first public listing by a domestic electric vehicles (EV) company. The public offer, which will open from August 2-6, is a combination of a fresh issue of Rs 5,500 crore and an offer for sale of up to 84.94 million equity shares by the promoters and investors. The company will raise up to Rs 6,146 crore at the upper price band of Rs 76 per share.
“Ola is already a proven brand,” says Puneet Gupta, Director at ratings agency S&P Global. “Now it needs capital to expand operations” due to the massive size of the Indian two-wheeler market, which is currently approaching 10-15 million units annually. Once Ola Electric becomes a listed company, says Gupta, a sense of trust will be instilled in its partners and suppliers to give them better pricing.
Ola Electric is coming up with higher valuations, says Kranthi Bathini, Equity Strategist at WealthMills Securities. “Therefore, it must become profitable going forward. Everything will depend on how the future earnings and margins will grow,” he says. The company posted a consolidated net loss of Rs 1,584 crore in FY24 compared to a net loss of Rs 1,472 crore in the previous year.
According to Ola Electric, Rs 1,228 crore of the net proceeds will go towards capital expenditure, Rs 1,600 crore for research and development, Rs 800 crore for paying off debt, and Rs 350 crore for organic growth initiatives.
The Ola Electric IPO is the first pure-play EV IPO of this scale, says independent market analyst Ambareesh Baliga. “A few other pure EV plays had been listed either due to reverse mergers or business restructuring, like Olectra Greentech (earlier Goldstone) or Wardwizard. Most of the other players are those that are still dependent on IC (internal combustion) vehicles but have diversified into EVs to be future-proof.”
Among the top EV manufacturers in the country, Ola Electric had a commanding 38.7% market share during the first six months (January-June) of 2024, followed by TVS Motor (17.8%), Bajaj Auto (13.4%), and Ather Energy (10.6%), per data sourced from the government’s Vahan dashboard. This market dominance highlights Ola Electric’s strong foothold in the evolving Indian EV sector.
Besides Ola Electric, the IPO will positively impact Ola Cabs, Krutrim, and Ola Maps, stimulating their growth, says Gupta of S&P Global. The IPO will also enable Ola Electric to venture into additional segments, such as motorcycles, three-wheelers, and four-wheelers, he adds.
Meanwhile, reports say Ola Electric has shelved its plans for an electric car that was slated to be launched later this year, as it wants to focus on two-wheelers.
Competitive pricing may test the firm. Previously there were incidents of Ola Electric scooters catching fire, which may also have some bearing. “We might see a price war coming up from Bajaj Auto or Hero MotoCorp. Once Ola starts selling in big numbers, Bajaj Auto and Hero MotoCorp will become aggressive with their ICE strategy and may work on thin margins. So, there will be a price war between the ICE and EVs,” says Gupta.
Bathini says that Bajaj Auto’s recently launched CNG bike may further intensify competition in the space. “One needs to see Ola Electric’s strategy with respect to rural demand,” he says.
For Ola Electric, it is still a long road ahead.
@OrielAstha11, @iamrahuloberoi