OLA Electric IPO – Review Detailed Analysis

Ola Electric is a leading electric vehicle company launching its IPO on August 2, 2024, and will close on August 6, 2024. With a valuation of ₹33,000 crore, this IPO will raise ₹6,150 crore. This review will help investors understand Ola Electric’s financials, growth potential, and industry trends to make an informed decision. Read the full Ola Electric IPO review to learn more about this investment opportunity and decide if it’s right for you.

About – OLA Electric

OLA Electric IPO – Review

Ola Electric is a leading Indian electric vehicle (EV) manufacturer, founded in 2017 as a subsidiary of ANI Technologies Pvt Ltd, the parent company of OLA Cabs. Headquartered in Bangalore, India, Ola Electric has become a major player in the EV industry, with a 47% market share. The company manufactures electric two-wheeler scooters , at its Gigafactory also known as Futurefactory, which has a current capacity to produce 1 million vehicles per year.

Ola Electric manufactures its own vehicles and develops its own technology. It also creates its own battery packs, software, and electronics. This approach gives Ola Electric full control over design, development and production of its vehicles, resulting in high-quality products and efficient customer service. With a strong sales and distribution network and service centers across India, Ola Electric can serve customers directly, without the need for intermediaries.

In Last year, Ola Electric utilized only 36% of its 1 million vehicle production capacity, selling just 360,000 vehicles.

Ola Electric plans to manufacture batteries and increase their capacity. Their short-term goal is to reach 20 Gigawatt hours, while their long-term goal is to achieve 100 Gigawatt hours. However, this is a claim, and its possibility remains uncertain and unclear.

Ola Electric makes its own products, including the technology to make them. Their Gigafactory currently has the capacity to produce 1 million vehicles, but they want to increase this to 2 million in the next 1-2 years and then expand to 10 million annual capacity. They also make their own battery packs, software, and electronics. By doing everything themselves, including research and development, sales, and service, Ola Electric can keep control over their costs and don’t have to rely on others

Ola Electric launched its first EV vehicle, the Ola S1 Pro, in December 2021, marking a significant milestone in its journey. The company has made significant investments in research and development to improve the performance and efficiency of its vehicles and is working towards backward integration.

Ola Electric’s revenue dependent on government subsidies. When the government offered a subsidy of ₹40,000, sales were good. However, when the government reduced the subsidy to ₹20,000-25,000, Ola Electric’s sales dropped by 58% in just one month. Even when the government was providing a subsidy of ₹40,000, Ola Electric was still not profitable. If the government were to discontinue the subsidy entirely, it would have a direct and significant impact on the company.

The company mentioned that it is not currently profitable, and there is no guarantee that it will become profitable in the future

Strength*

• Market Share: 47% market share in the EV market
• Ola Electric does everything own, from manufacturing electric vehicle, batteries, software and electronics to conducting R&D and operating service centers across India without any dependency.
• Access to customer data: 12.5 crore customer data through OLA Cabs for free marketing
• Gigafactory: Capacity of 1 million vehicles, with plans to increase to 2 million and 10 million
• Ola Electric’s anchor investors, including SBI, HDFC Mutual Fund, and Nippon Life India Trustee Ltd, have invested in the company, showing confidence in its growth potential. Despite consistent losses since its inception and not yet being profitable.
• Ola Electric is working on making its own battery cells. This is a crucial component of electric vehicles. They have been researching and developing (R&D) this for 4 years. By making their own battery cells, they can reduce dependence on other suppliers, control the supply chain, and improve efficiency.

Weakness*

• Dependency on government subsidy
• Raw material dependency: The company is dependent on lithium and cobalt, imported from China, for manufacturing batteries.
• Employee Attrition rate: Company has 47% of employee attrition rate which means 47% of Ola Electric’s employees leave the company within a year.
• Hero, Bajaj, and TVS are competitors in the EV market
• R&D expenses: Significant investments in R&D with no guarantee of returns
• Ola Electric has not been profitable since its inception, with significant losses every year
• Several allegations have been made against the company, including sudden fires in scooters, which can impact its customer trust.
• Despite being only 2.5 years old (launched its first scooter in December 2021), Ola Electric’s valuation has reached ₹33,000 crore, which may be considered high given its short operating history and consistent losses.

OLA Electric IPO Details

Ola Electric has achieved sales of ₹5,200 crore with a loss of ₹1,600 crore. The company is valued at ₹33,000 crore and wants to raise ₹6,150 crore through its initial public offering (IPO). The IPO will allocate ₹5,500 crore for the company’s growth, which will be utilized for specific purposes: ₹1,200 crore for expanding the existing giga factory, ₹1,600 crore for research and development, ₹800 crore for loan repayment, ₹350 crore for general growth and operations, and ₹1,550 crore for other purposes and ₹645.56 crore will be allocated for offer for sale to existing investors, with a price band of ₹72-₹76.

OLA Electric IPO Reservation

OLA Electric IPO Anchor investors Details

Ola Electric IPO received bids on August 1, 2024, with 363,556,135 shares offered to anchor investors. The total value of the anchor portion amounts to ₹2,763.03 crores. The shares are subject to a lock-in period, with 50% of the shares unlocking on September 6, 2024, and the remaining 50% unlocking on November 5, 2024. This means that anchor investors will be restricted from selling their shares until the respective lock-in periods end, ensuring stability and confidence in the investment. Check full Anchor investors list – click here

OLA Electric IPO Lot Size

OLA Electric IPO Timeline

OLA Electric Financials

Ola Electric’s finances are growing, but they’re still facing challenges. In 2022, their revenue was 456 crores, but their loss was 784 crores. In 2023, their revenue grew 6 times from 2022, reaching 2783 crores, but their loss also grew to 1472 crores. In 2024, their revenue increased by 90% from 2023 to 5243 crores, but their loss remained high at 1584 crores.

The company is borrowing more money each year. They borrowed 750 crores in 2022, 1645 crores in 2023, and 2390 crores in 2024. Even though their revenue is increasing, their loss is also increasing. Along with that, the company’s debt is also increasing.

OLA Electric KPI (key Performance indicators)

OLA Electric IPO Subscription Status

OLA Electric IPO Day-wise Grey Market Premium (GMP)

OLA Electric Stock Buy or not?

it’s a high-risk investment. The company has high losses, borrowings, and dependency on government subsidy. However, it also has a strong market share, growth potential, and plans for expansion. If you’re interested in investing in Ola Electric, consider that their stock may be a good fit if you’re okay with taking on high risks and can hold onto your investment for a long time. Just remember to keep a close eye on how the company is doing and check their financials regularly

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Conclusion

Ola Electric has growth potential in the EV market, with a strong market share and expanding manufacturing capacity. However, the company’s financial performance, dependence on government subsidies, and raw material dependency are concerns. The IPO valuation is high, and the company potential to achieve profitability and sustain growth is uncertain.

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