Ola Electric IPO GMP turns nil even as issue sees 3x bids on Day 3 so far

The initial public offering (IPO) of Ola Electric Mobility continued to see a lacklustre response from the investors during the third and final day of the bidding process amid jittered market sentiments. The issue managed to sail through on the second day and ended day one with a 35 per cent bidding.
 

Ola Electric Mobility is selling its shares in the price band of Rs 72-76 apiece. Investors can apply for a minimum of 195 shares and its multiples thereafter. It is looking to raise Rs 6,145.56 crore via IPO, which includes a fresh share sale of Rs 5,500 crore and an offer-for-sale (OFS) of 84,941,997 equity shares.
 

According to the data, the investors made bids for 1,39,41,99,690 equity shares, or 3 times, compared to the 46,51,59,451 equity shares offered for the subscription by 2.30 pm on Tuesday, August 06. The three-day bidding for the issue, which opened on Friday, August 02, concludes today.
 

The allocation for retail was subscribed 3.64 times, while the portion reserved for qualified institutional bidders (QIBs) saw a subscription of 3.22 times. Portion for employees was booked 11.01 times. However, the quota set aside for non-institutional investors (NIIs) was booked 2.07 times.
 

Bengaluru-based Ola Electric Mobility was founded in 2017 and the company is a pure-play electric vehicle player that primarily manufactures electric vehicles and certain core components for electric vehicles such as battery packs, motors, and vehicle frames at the Ola Futurefactory.
 

The grey market premium (GMP) of Ola Electric has taken a big hit amid the rising volatility in the broader markets, amid the dented bidding sentiments. Lastly checked from multiple sources, the company was commanding no premium in the unofficial market. However, the premium stood at Rs 4 on the second day of the bidding.
 

Brokerage firms have mixed views on the IPO. Some analysts are positive on the company's leadership in the E2W market, focus on EV space, government push and rising culture of EVs. However, they see loss -making nature of the business and rich valuations are the biggest concerns for the issue.
 

Ola Electric is demanding an EV/sales multiple of 6.3 times, which is at a significant premium. It has undertaken a massive capital spending in the initial years and has also planned a massive capital outlay in the medium term, reflecting its ambitious growth plans. Key concern is its reliance on government subsidies for generating sales and its loss making operations, said Choice Broking.
 

"Considering the dominant position maintained by the company in the E2W space, benefits from the backward initiative like cell manufacturing and its wide application in the energy storage application, we believe the demanded valuation seems to be reasonable," it added with a 'subscribe with caution' rating for the issue.
 

Ola Electric allotted 36.4 crore shares to anchor investors to mop up Rs 2,763 crore at a price of Rs 76 per share. Ola Electric reported a net loss of Rs 1,584.40 crore with a revenue of Rs 5,243.27 crore for the financial year ended on March 31, 2024. The company's net loss stood at Rs 1,472.08 crore with a revenue of Rs 2,782.70 crore in the fiscal year 2022-23.
 

Ola electric is the leader of a rapidly growing market with a 35 per cent share, but intense competition may limit profitability in the near term, potentially keeping the company loss-making. Meanwhile, Hero's recent investment in Ather Energy values the company at 3.2 times FY24 sales, significantly lower than Ola's valuation of 6.9 times, said Nirmal Bang Securities.
 

"While Ola's market leadership, faster growth and investment in cell development productions we do believe Ola deserves premium valuations over Ather, Its current valuation appears high, so we recommend subscribing to the issue for long-term," it said.
 

The company has reserved shares worth Rs 5.5 crore for the eligible employees of the company, who will get a discount of Rs 7 per share in the issue. 75 per cent for the net offer has been reserved for qualified institutional bidders, while non-institutional investors will get 15 per cent of the net offer. Retail investors will have only 10 per cent of the net offer allocated for them.
 

BofA Securities India, Axis Capital, Kotak Mahindra Capital, SBI Capital Markets, Citigroup Global Markets India, Goldman Sachs (India) Securities, ICICI Securities and BOB Capital Markets are the lead managers of the IPO, while Link Intime India is the registrar for the issue. Shares of the company will be listed on both BSE and NSE likely on August 9, Friday.

 

 

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.