Ola Electric Mobility Ltd shares surged a solid 16 per cent, hours after hitting their record low of Rs 46.32 on BSE today, taking stock investors by surprise. The stock, which had come under pressure after an operational creditor of a subsidiary Ola Electric Technologies reached NCLT on alleged default of payments, climbed 15.86 per cent to hit a high of Rs 54.35 on BSE. It was up 17.33 per cent from a low of Rs 46.32 hit earlier today.
In the past three months, Ola Electric faced multiple challenges, including the EV two-wheeler industry’s slower-than-expected growth, the EV 2W segment’s market share loss, a delay in the motorcycle launch due to a homologation issue and profitability impact, owing to higher warranty issues.
"While we expect profitability to improve in the coming quarters, owing to cost-cutting initiatives, we believe the volume uptick will fall below the Street’s expectations. The motorcycle launch remains the key, as failure to meet customers’ expectations will continue to weigh on brand equity and long-term market share. Reduce stays, as execution falls short of expectations," Kotak Institutional Equities said.
The brokerage has revised its fair value to Rs 50 for Ola Electric, down 23 per cent from Rs 65 earlier.
In the case of alleged default, Ola Electric Mobility said it strongly disputes the claims made and was seeking appropriate legal advice. Ola said it would take all necessary and appropriate steps to protect its interests and object to the allegations in the aforesaid matter.
Creditor Rosmerta Digital Services' petition has been submitted before the National Company Law Tribunal – Bengaluru Bench. It alleged default in payment towards the services rendered by it to the Ola Electric arm and is seeking initiation of the Corporate Insolvency Resolution Process against the Ola Electric Technologies Private Ltd.
Data showed electric two-wheeler sales volume in February grew year-on-year -- adjusted for Ola Electric’s unregistered sales, as per company filings, but declined month-on-month. Ola Electric gained the most market share in february, followed by Bajaj Auto and Hero MotoCorp. TVS has passed on most of its PLI benefits to customers by lowering prices of its EV models in February, BNP Paribas noted in a note.
Ola Electric last week announced discounts of up to Rs 26,750 on the S1 Air and Rs 22,000 on the S1 X+ (Gen 2), with the models starting at Rs 89,999, and Rs 82,999, respectively. It also offered discounts of up to Rs 25,000 on the rest of its S1 range, including all the scooters from its latest S1 Gen 3 range.
"Given the relatively weak brand equity of new-age OEMs, we believe incumbents will have a slower roll-out of newer models (protect margins), which will further weigh on the e-2W industry’s growth prospects. Hence, we expect the e-2W industry to report a 31 per cent CAGR in FY2024-27 versus the earlier expectation of 40 per cent," Kotak said.
Ola expects its automotive segment to achieve Ebitda breakeven by the June quarter, driven by the implementation of its network transformation and opex reduction program. Ola Electric highlighted that it has reduced gross operating expenses by Rs 90 crore per month, driven by Rs 32 crore due to lower service and warranty costs, Rs 29 crore on account of headcount optimisation and Rs 25 crore pertaining to network transformation.
Kotak Institutional Equities said Ola Electric may partly pass on benefits to end consumers to drive an uptick in sales volume and gain market share.