Shares of Ola Electric Mobility Ltd have remained a buzz word on Dalal Street ever since the listing of the counter. The stock, which made a flat listing, turned multibagger within a week of its debut, is now struggling to get its mojo back, particularly after the lock-in expiry of the anchor investors.
Adding to its concerns, brokerage firm Ambit has initiated coverage on the stock and the domestic broker sees more slide in the stock citing the risks associated with the company, despite its rapid pace of growth. It believes that the electric vehicle (EV) market in India is at the nascent stage and rising competition will drive its market share lower.
"We expect e-2W penetration to rise from 5.7 per cent in FY25YTD to 23.5 per cent by FY29E, driven by e-motorcycle launches," said Ambit. "The competitive landscape will evolve as existing e-2W players expand their portfolio and reach; Honda and Suzuki launch e-2Ws by 4QFY25 and incentives change. Its market share dropped from 35 per cent in FY24 to 27.5 per cent by FY29 and 25 per cent by FY31."
Shares of Ola Electric Mobility were listed on August 9, 2024 on a flat note, that is at the issue price of Rs 76. However, the stock surged more than 107 per cent to Rs 157.53 on August 20. However, the stock opened at Rs 114.20 on Wednesday, correcting 28 per cent from its all-time highs. The total market capitalization of the company stood at Rs 50,000 crore.
However, Ola Electric is the only e-2W player to make motors, BMS and li-ion cells and owns its sales network. It benefits from the most incentives, including exclusive ones but it will require higher capex, said the Mumbai-based broker in its IC report on the stock.
"We expect e-2W OEMs to prioritize market share over margins. We estimate Ola's volumes to grow from 3.30 lakh in FY24 to 1 million in FY27 and 1.64 million by FY29. Economies of scale and lower battery costs should reduce BOM cost, improving gross margins to 26.1 per cent by FY29. Operating leverage should lead to Ebitda break-even by FY27," it said.
The anchor lock-in period for 50 per cent of Ola Electric shares, totalling 18.18 crore or 4 per cent of the company's outstanding shares, ended on Friday, September 6. The end of the anchor lock-in period implies that 18.18 crore shares that were locked in by anchor investors were free to trade in the market.
Ola Electric reported a consolidated net loss of Rs 347 crore for the quarter ended June 30, 2024, widening nearly 30 per cent on a year-on-year (YoY) basis from Rs 267 crore in the year ago period. The EV two-wheeler maker's revenue from operations rose 32.3 per cent YoY to for the quarter stood at Rs 1,644 crore. Ebitda loss came at Rs 205 crore for the reported quarter.
Ola Electric deserves a premium for wider coverage of the e-2W value chain, it said. "But we expect market share to decline to 25 per cent by FY31. Ask rate at current levels for volume growth implies 36.3 per cent CAGR over FY24- 35E, which is slightly higher than our estimate, leaving low margin of safety against the risks mentioned above," it added with a target price of Rs 99.6.