OLA Electric IPO: Key details, Dates Objectives, Risks

The planned offering involves issuing new equity shares worth up to ₹5,500 crore, along with a sale offer (OFS) of 95,191,195 existing shares, each with a nominal value of ₹10.

Ola Electric is India's first pure-play to file for an Initial Public Offering (IPO). The IPO, which aims to raise Rs 5,500 crore, is a significant step for Ola Electric in consolidating its position in the electric two-wheeler segment. The IPO comes at a time when traditional players like TVS Motors and Bajaj Auto are increasingly competing for market share in this rapidly growing sector.

Ola Electric has established itself as a frontrunner in the Indian electric two-wheeler market. It has been able to capture about 40% market share in the two-wheeler EV space. The proposed IPO is set to strengthen Ola Electric's leading position in the market, providing the necessary capital for further expansion and innovation like Ola Electric’s manufacturing facility in Tamil Nadu.

In its Draft Red Herring Prospectus, Ola Electric said that the aim of its IPO is increase its production capabilities but also to enhance its technological prowess in areas like battery development and energy efficiency. The IPO proceeds are expected to be used for various purposes, including expanding the company's lithium-ion cell business, doubling the capacity of its two-wheeler manufacturing, investing in research and development, and repaying loans. Ola Electric’s founder Bhavish Aggarwal is expected to sell 47.4 million shares.

Company Financials (Rs million)

The electric vehicle market in India, while promising, presents several challenges. One of the significant hurdles Ola Electric faces is the fluctuation in government subsidies, which has a direct impact on EV sales. The recent reduction in subsidies under the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles II scheme has led to a marginal decrease in the penetration of electric two-wheelers. Despite these challenges, Ola Electric has demonstrated remarkable growth, with sales volumes tripling in FY23.

The rapid growth in the two-wheeler EV space has drawn attention from larger rivals like TVS and Bajaj who have expanded their EV offerings. These incumbent players, with established distribution networks and significant cash reserves, pose a considerable challenge to Ola Electric's growth aspirations. The IPO is a strategic move by Ola Electric to solidify its financial position and invest in areas that will give it a competitive edge, such as product development and customer experience.

The success of Ola Electric's IPO will have far-reaching implications, both financially and strategically. It is a test of investor confidence in the EV market and Ola Electric's business model. A successful IPO will not only provide the necessary capital for Ola Electric's expansion but also boost the overall investor sentiment towards the EV sector in India.

Expense Breakdown of Ola Electric (Rs million)
 

India has a large automotive market with annual production of 26 million vehicles as of FY 2023 according to Society of Indian Automobile Manufacturers (SIAM). 

Ola Electric has delivered four products and additionally announced six new products and commenced delivery of its first EV model, the Ola S1 Pro, in December 2021. This was followed by the delivery of the Ola S1 in September 2022, the Ola S1 Air in August 2023, and the Ola S1 X+ in December 2023. Since mid-August, the company has announced a line-up of motorcycles comprising four models, Diamondhead, Adventure, Roadster and Cruiser. The company has stated that it plans to start delivering its latest model, Ola S1 X, by the first half of Fiscal 2025 and the motorcycles in the first half of Fiscal 2026.

Ola Electric's emphasis on building a comprehensive EV ecosystem, including charging infrastructure and after-sales services, will be crucial in driving long-term growth. In the evolving landscape of the Indian electric vehicle market, Ola Electric faces both challenges and opportunities. One of the primary challenges is the highly competitive environment. The company competes not only with traditional automobile manufacturers diversifying into EVs but also with a slew of new startups focused exclusively on electric mobility. The competition is not just in terms of market share but also in technological innovation, customer experience, and brand positioning.

Another significant challenge is the dependency on government policies and subsidies. The Indian government has been supportive of the EV sector through initiatives like the FAME-II scheme, which offers subsidies to electric vehicle buyers. However, the regulatory landscape is volatile and minor developments can significantly impact sales.
 

Peer Analysis
 

Research and Development is central for Ola Electric to grow revenues and expand market share. The company has 974 on-roll and off-roll employees dedicated to R&D across product development, vehicle and software engineering, vehicle design and cell development, as of October 31, 2023. It develops its battery, battery management system and vehicle software in-house, which gives them the advantage of significant control over our product performance.