Backed by SoftBank, Ola Electric, the biggest e-scooter player from India, is all prepared to come up with its much-hyped initial public offering this week. This would represent the first-ever IPO of its category by an Indian electric vehicle maker, valued at an estimated $740 million. Interest is likely to be very high from marquee global investors such as Fidelity, Nomura, and Norway’s Norges Bank, in addition to some of the best Indian mutual funds.
Long-term investor interest: Interest from long-term domestic and global investors in Ola Electric IPO could be strong. It is likely that Nomura and Norges Bank will each invest about $100 million, while Fidelity will contribute $75 million. Such an investment would represent a portion of the anchor book for Ola’s IPO, which distributes shares to marquee institutional investors before the firm’s listing. This strategic move will instill faith in investors and ensure a profitable IPO.
Regional Indian mutual funds, such as SBI, HDFC, UTI, and Nippon India, could collectively bid in excess of $700 million. The steep growth curve and the role of Ola Electric in dominating the EV market of India have actually been the chief reasons behind this hugely positive response from domestic and foreign investors.
IPO Details and Financial Breakdown
Now, Ola Electric has fixed an IPO price range of Rs 72–76 for this equity share in its maiden public offering. Subscriptions open on August 2 and run till August 6. The total issue size of the IPO stands at Rs 6145.96 crore, including a fresh issuance of Rs 5500 crore and an offer for sale of up to 84.94 million equity shares. This should sustain all sorts of financial acrobatics to raise money to support the grand development goals for which Ola has set the pace.
It is Bhavish Aggarwal and Indus Trust who are offloading the largest amount of OFS shares at 3.79 crore and 41.79 lakh equity shares, respectively. The three key OFS stockholders remaining in the fray are SVF II Ostrich, Alpha Wave Ventures II LP, and MacRitchie Investments Pte. Ltd. The fact that this kind of array of investors has so much faith in Ola Electric’s future is clear as daylight.
Using the IPO Money judiciously
The major reasons for this new issue are to protect Ola’s overall financial stability and to make prudent investments in increasing the company’s production capacity. Funding of Rs 1,227.64 crore will be used to further ramp up the capacity of the Ola Gigafactory cell production facility from 5 GWh to 6.4 GWh through the OCT subsidiary. Gigafactory capacity increase is critical to feed the accelerating demand for electric vehicles, ensuring that their vital components are supplied uninterruptedly.
The rest Rs 800 crore to be used for capacity expansion and repayment of the debt at its subsidiary OET. Of June 15, Ola had total dues of Rs 996.67 cr. Cutting this provide strength to its balance sheet and improve overall financial stability.
The company also eyes an investment of Rs 1,600 crore for R&D and product development so that it does not get left behind and can demonstrate its willingness and seriousness toward innovation. Taking the vision further to make Ola a clear leader in the EV industry, the company is eyeing an additional Rs 350-crore investment in organic business growth. The balance is going to be used for Ola’s general corporate purposes, which would not only make the company more nimble but also better positioned to address future challenges and tap opportunities.
Trends in the Market and Future Prospects
Ola Electric has been increasing its market share in the E2W segment of India since December 2021, when the first electric scooter was shipped out of its Factory. It has seen its revenue from operations jump 90.4 percent to Rs 5,009.8 crore in FY24, while the company has reported a net loss of Rs 1,584.4 crore. Substantial investments that Ola made in building future growth resulted in an EBITDA loss of Rs 1,267.6 crore for FY24.
Pan-India, Ola has built an omnichannel direct-to-consumer distribution network of 870 experience centers and 431 service centers. Ola sold over twice the units in FY24 vis-à-vis the previous year. Ola’s market share in the E2W category increased to 35 percent from 21 percent in FY23 at the end of FY24.
Equilibrium Forecast
The IPO of Ola Electric would be one of the big-ticket listings in the Indian electric vehicle business. Interest from marquee domestic and foreign investors reflects the bets being placed on the money-making potential of Ola. One needs to remember that the firm is still bleeding and competition in the EV market has only just started hotting up.
Ola’s future will depend on its ability to get beyond these challenges and continue with the expansion, even when the firm desperately needs the IPO funds to support its expansion and innovation aspirations. Ola Electric is going to be closely watched by investors and other industry participants alike in entering this new phase of its business.
