Ola Electric IPO Analysis - Dream or Financial Nightmare?

Ola Electric Mobility kicked off its initial public offering (IPO) for bidding on Friday, August 2 and the bidding will conclude on Tuesday, August 6. The electric vehicle (EV) maker is offering its shares in the price band of Rs 72-76 a piece, where investors can apply for a minimum of 195 shares and multiples thereafter. Let us now try to understand a few details about Ola Electric to better analyze the Ola Electric IPO.

Ola Electric IPO - Company Overview

Ola Electric Mobility Limited was founded in 2017 and is an electric vehicle company that primarily manufactures electric vehicles and certain core components such as battery packs, motors, and vehicle frames at the Ola Future Factory.

Since August 2021, the company has launched 7 new products and announced four. The first EV model, Ola S1 Pro, was delivered in December 2021, followed by the Ola S1, Ola S1 Air, Ola S1 X, and Ola S1 X+ in the following years. On August 15, 2023, the company announced new EV models and a range of motorcycles including Adventure, Diamondhead, Roadster, and Cruiser.

As of October 31, 2023, the company operates its D2C omnichannel distribution network across India. This network comprises 870 experience centers and 431 service centers, including 429 service centers located within experience centers, in addition to the Ola Electric website.

Ola Electric IPO - Financial Overview

If we take a look at the financials of Ola Electric, we can see that the company has increased its revenue year on year from Rs.106.08 crores in FY21 to Rs.5,243.27 crores in FY24. But along with the rising revenues, the company's operating costs have also increased due to which the company has been failing to retain profits. The net loss of the company has increased from Rs.199.23 crores in FY21 to  RS.1,584.40 in FY24. Furthermore, the borrowing of the company has also increased from Rs. 38.87 crores to Rs. 2,389.21 crores which further increased the interest obligations of the company.

Ola Electric IPO - Industry Overview 

E2Ws are at the pioneering of India's mobility electrification due to their low total cost of ownership and the Indian government's production-linked incentives and subsidies to encourage domestic manufacturing and EV adoption. 

In India, E2W penetration is projected to increase from 5.4% of domestic 2W registrations in Fiscal 2024 to 41-56% of domestic 2W sales volume by Fiscal 2028. The Indian E2W industry is expected to grow at a CAGR of 11%, reaching a size of Rs.2.8 trillion to Rs.3.6 trillion in Fiscal 2028. Furthermore, areas like as Africa, Latin America, and Southeast Asia provide considerable export opportunities for Indian E2W OEMs.

Comparing Ola Electric to its Peers

When comparing the EPS of Ola Electric to other companies, we can see that all the companies are profitable except for Ola. Furthermore, we can see that while all the other companies are giving returns above 20% to their shareholders, Ola has a negative ROE of 78.46% which indicates that the shareholder's value is eroding in the company. This clearly shows that the company is underperforming when compared to its peers

Ola Electric IPO Details

Ola Electric IPO Date:

The IPO of Ola is open to subscription from August 2, 2024, to August 6, 2024. The shares will be allocated to investors on August 7, 2024, and the company will be listed in the NSE and BSE on August 9, 2024

Ola IPO Share Price

The electric vehicle (EV) maker is offering shares in the price band of Rs 72-76 apiece. If you bid for the IPO at the upper price band, you would require an investment of Rs. 14,820 per lot (195 shares).

Is Ola Electric IPO a Good Or Bad Investment: Final Thoughts

In conclusion, investing in Ola Electric's IPO is a high-risk, high-potential opportunity. The company shows strong revenue growth and operates in a rapidly expanding electric vehicle market, which offers significant growth potential. However, Ola Electric's current financial losses, negative EPS and ROE, and underperformance compared to established peers are major concerns. This investment would be speculative, betting on future growth rather than current financial strength. Therefore, it is recommended that investors properly access their risk profiles before investing in such IPOs.

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