Ola Electric share price at Rs 30? Why Kotak retained 'Sell' rating on the stock

After rallying 18 per cent in the previous session, shares of Ola Electric Mobility resumed downward trend in Tuesday's trade, as Kotak Institutional Equities maintained its 'Sell' rating on the stock. The Ola Electric stock fell 3.44 per cent to Rs 45.51 apiece on BSE. 

Ola Electric's first quarter loss was lower than Kotak Institutional Equities' forecasts. However, despite better-than-expected sales figures, Kotak maintained a cautious outlook on the company's growth trajectory.

Kotak Institutional Equities remained concerned about the muted industry growth and increased competitive intensity affecting Ola's performance. Ola Electric reported sales of Rs 830 crore for 1QFY26, marking a 50 per cent year-on-year decline but a 36 per cent increase from the previous quarter. The sales surge was primarily driven by clearing the backlog from the previous quarter. Kotak Institutional Equities said Ola's registrations in 1QFY26 were 60,000 units, while deliveries were 68,000 units. This discrepancy is attributed to the backlog clearance from the fourth quarter of FY25.

Despite exceeding earnings expectations, Ola Electric's volume numbers remain a concern. The company recorded an Ebitda loss of Rs 240 crore, which was less than Kotak's anticipated Rs 290 crore loss. The improvement in Ebitda was due to higher deliveries from the backlog and better gross margins, driven by Gen-3 product shifts and cost control.

Kotak Institutional Equities maintained 'Sell' with an unchanged fair value of Rs 30 based on DCF methodology.

The volume offtake for Ola remains below expectations, with Kotak cutting its FY26-28 volume assumptions by 12-16 per cent. The firm's analysis suggests that the increased competitive intensity within the EV 2W industry will weigh heavily on Ola's market share. Kotak anticipates improvements in profitability from FY26 onwards, aided by cost-cutting initiatives and a shift to the Gen-3 platform.

The company's current forecasts suggest sales of 3,25,000-3,75,000 units in FY26, yet Kotak expresses doubts about these targets, adjusting its expectations to 3,10,000 units. The persistent low growth in the EV sector poses a challenge to Ola's aspirations, it said. 

Future prospects for Ola Electric hinge on cost efficiency and strategic adjustments. Kotak highlights the importance of Project Lakshya in cutting costs, reducing the bill of materials, and lowering warranty provisions. Moreover, the successful utilisation and PLI realisation of Ola's 5 GWh Gigafactory are seen as potential upside risks.

Competition remains a significant hurdle for Ola, as other industry players continue to intensify their market presence. The firm continues to evaluate its competitive strategies to sustain and potentially grow its market share amidst these challenges. Ola Electric's performance is closely watched by investors, with Kotak Institutional Equities' ongoing 'Sell' rating reflecting a cautious stance on the company's future.

Kotak's analysis underscores the ongoing challenges faced by Ola Electric in an increasingly competitive market. While short-term sales figures have provided a positive surprise, long-term volume targets remain under scrutiny. Ola's strategic adjustments and cost-cutting measures will be critical as it seeks to navigate the evolving landscape of the electric vehicle industry, Kotak said.