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Ola IPO: Everything You Need to Know Before Investing

  •  4 min read
  • 0•
  • 01 Aug 2024
Ola IPO: Everything You Need to Know Before Investing

Ola Electric Mobility Limited is a pure EV player in India engaged in building vertically integrated technology and manufacturing capabilities for EVs and EV components, including cells. It manufactures EVs and certain core EV components like battery packs, motors, and vehicle frames at the Ola Future Factory.

Its business focuses on capturing the opportunity arising from the electrification of mobility in India. It seeks opportunities to export its EVs in select international markets. The company has delivered seven products and announced four new products since its first product announcement in August 2021.

The company operates its direct-to-customer (D2C) omnichannel distribution network across India, comprising 870 experience centres and 431 service centres as of March 31, 2024.

Source: RHP

According to the Redseer Report, Ola Electric Mobility Limited had the highest revenue of all Indian-incorporated electric 2Ws (E2Ws) original equipment manufacturers (OEMs) from E2W sales in Fiscal 2023.

Within nine months of delivering its first EV scooter in December 2021, it became the best-selling E2W brand in India in terms of monthly E2W registrations on the VAHAN Portal of the Ministry of Road Transport and Highways (VAHAN).

The Ola FutureFactory is India's largest integrated and automated E2W manufacturing plant, in terms of production capacity, by an E2W-only OEM as of March 31, 2024. The company's business model hinges on three key pillars:

  • R&D and technology
  • Manufacturing & Supply Chain
  • Go to Market

The company's business model across the three key pillars enables it to improve EVs' performance, resulting in a better customer experience, business growth, and cost control. It also enables the company to continuously focus on and invest in R&D and technology, giving rise to flywheel effects.

Source: RHP

The table captures some of the key financials of the company:

Particulars FY24 FY23 FY22
Total assets (in ₹ crores)
7735.409
5573.169
5395.863
Total liabilities (in ₹ crores)
5716.070
3216.725
1734.411
Total income (in ₹ crores)
5243.270
2782.697
456.260
Diluted earnings per share
(4.35)
(3.91)
(2.23)
Losses for the year (in ₹ crores)
(1584.40)
(1472.079)
(784.150)
Return on net worth (in %)
(78.46)
(62.47)
(21.42)
EBITDA (in ₹ crores)
(1040.191)
(1197.098)
(717.552)

Source: RHP

The Ola IPO opens on 2nd August and closes on 6th August. The table captures the key IPO details:

Number of shares available in offer for sale

84,941,997

Price Band

₹72 to ₹76 per equity share

Bid Lot

195 equity shares and in multiples thereof

Face value

₹10

Fresh issue of equity shares aggregates up to ₹5,500 crores
Number of shares available in offer for sale
84,941,997
Price Band
₹72 to ₹76 per equity share
Bid Lot
195 equity shares and in multiples thereof
Face value
₹10

Source: RHP

The company plans to utilise the IPO proceeds for funding:

  • Capital expenditure of its subsidiary, Ola Cell Technologies Pvt Ltd (OCT), for expansion of the capacity of its cell manufacturing plant from 5 GWh to 6.4 GWh
  • Repayment or prepayment, in full or part, of the indebtedness incurred by its subsidiary, Ola Electric Technologies Private Limited (OET)
  • Research and development
  • Expenditure towards organic growth initiatives
  • General corporate purposes

Source: RHP

India is the second-largest 2W market globally and the third-largest in the 4W market in terms of domestic sales. The total addressable market for 2W exports from India is between ₹ 7.20 trillion to ₹ 8 trillion. The trend towards electrification of mobility is driven by the increasing affordability of EVs attributable to lower battery prices, improved EV driving ranges, and regulatory support.

In FY 2024, after a review of phase II of FAME subsidies, the Ministry of Heavy Industries (MHI) introduced the Electric Mobility Promotion Scheme 2024 (applicable from April 1, 2024) to accelerate the adoption of E2Ws and E3Ws and to further the development of the EV infrastructure in India.

Ola Electric Mobility believes it's well positioned to address this large market opportunity in EVs through its vertically integrated approach, focus on technology, R&D, execution ability, and eligibility for certain government incentives.

Source: RHP

Some of the risks and challenges for Ola Electric Mobility Limited are:

  • Losses and negative cash flows from operations since inception
  • Limited operating history in manufacturing EVs
  • No assurance of returns from investing in R&D and technology
  • Elimination of government incentives or the ineligibility of any of our electric vehicles for such incentives would increase the retail price of its electric vehicles and could adversely affect customer demand
  • Inability to claim government incentives under the PLI Schemes or if PLI Schemes are discontinued, the company may become less competitive due to higher product pricing

Source: RHP

Go through the company’s red herring prospectus to understand the company and its various aspects fully. Also, evaluate your financial goals and risk tolerance before subscribing.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their own research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Please read the SEBI-prescribed Combined Risk Disclosure Document prior to investing. Brokerage will not exceed SEBI’s prescribed limit.

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