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Ola Electric holds a battery secret on road to IPO
Summary
- Singapore-based Eastspring, a subsidiary of Prudential Plc, and UK-based Pictet are among investors which have shown interest to be anchor investors in the e-scooter firm.
Bhavish Aggarwal-led Ola Electric is close to signing up anchor investors for its initial public offering (IPO), the first in India's electric vehicle space, two people aware of the development said. The maker of S1 series of electric scooters has pitched its state-of-the-art battery technology under development as the USP in its road shows, the people said.
Singapore-based Eastspring, a subsidiary of Prudential Plc, and UK-based Pictet are among investors which have shown interest to be anchor investors, the people cited above said on condition of anonymity.
Ola Electric, which dominates India's electric two-wheeler space with more than 40% share in March, expects its battery arm Ola Cell Technologies to help reduce costs and increase profitability. According to the people cited above, Ola Electric has told prospective investors that its cell division is developing advanced batteries with the '4680' form factor, adopted by battery tech pioneers such as Tesla and Panasonic. This hard-to-make form factor, adopted by Tesla in 2020, enables longer ranges, quicker charging, and better overall performance.
Ola Electric, Pictet and Eastpark did not respond to Mint's emailed queries.
In its share sale papers, Ola Electric had said it will use some of the IPO proceeds to expand the capacity of its cell factory from 5 GWh to 6.4 GWh. "We are constructing the Ola Gigafactory for cell manufacturing in Krishnagiri district in Tamil Nadu, India. Phase 1(a) of the Ola Gigafactory is expected to be operational by March 31, 2024, at which time it will have a production capacity of 1.4 GWh. We expect to complete Phase 1(b) and expand the production capacity of the Ola Gigafactory to 5 GWh by October 2024", it added.
"We aim to develop new cell form factors which are capable of storing five times the energy of conventional cell form factors and use advanced technologies such as advanced electrode manufacturing technologies", the company had said, in an apparent reference to the 4680 form factor that it is pitching to investors now.
Recently, Reuters reported that Ola Electric was looking to bid for lithium blocks being auctioned by the government, aiming to secure a key raw material for batteries.
"Original equipment manufacturers (OEMs) having presence across the value chain of electrification from localization to charging infrastructure will enjoy the advantage of economies of scale, provided they are able to scale their output, thereby delivering cost efficiencies. This will help India emerge as a large manufacturing base for electric two-wheelers," said Hemal Thakkar, senior practice leader and director at Crisil.
On 13 March, the Centre unveiled the ₹500 crore Electric Mobility Promotion Scheme (EMPS) 2024 to encourage the purchase of electric two- and three-wheelers, a measure expected to support companies including Ola Electric. However, despite EMPS extending subsidy benefits for four months, the quantum of subsidy per vehicle has been lowered, noted Rohan Kanwar Gupta, vice president, ICRA. "Accordingly, a reduction in the subsidy benefit is a short-term impediment and will impact demand/realizations to an extent. Notwithstanding the same, OEMs will continue to strive to offer competitive products by leveraging their cost structure through localization of key components and value engineering capabilities. In addition, softening in battery cells prices (which accounts for almost 40% of vehicle cost) will also help them offset the impact of lower subsidies to some extent," Gupta added.
"While the industry is likely to witness an exponential rise in volumes over the medium term, the road to profitability for the industry remains long; thus, a timely fund-raising to support the capital structure/competitiveness of start-up players would be key. The same assumes even greater importance, given the ever-increasing competitiveness in the EV segment, with incumbent OEMs also ramping up their presence in the segment," Gupta of ICRA added.
Founder Aggarwal plans to sell up to 47.4 million shares in the Ola Electric IPO, while the company will look to raise ₹5,500 crore by selling new shares. Ola Electric was said to seek a valuation of at least $10 billion when it floated its IPO plans in the first half of 2023. However, the company was valued at $5.4 billion, when it raised $385 million in October. According to people aware of these discussions, the company may fetch a valuation of around $6 billion in the IPO. The final valuation will be determined when the issue opens for subscription. Only 10% of Ola's IPO is reserved for retail subscription.
Ola has been offering discounts of up to ₹25,000 per scooter in recent months. Meanwhile, electric two-wheeler rival Ather Energy is also eyeing the public markets, with an IPO planned during the year.
In January, Mint reported that Ola Electric had sold at least 12,000 scooters to group company ANI Technologies and its subsidiaries from April 2022 to December 2023, with the majority of these sales in December 2023. These sales have continued into 2024 as well, the people cited in the report said. However, Ola Electric denied the bump in registrations in December. It also pointed to its own figure of 8,206 scooters registered by ANI Technologies till December. This has led to the company's market share in cities such as Delhi and Lucknow soaring, whereas in other states with high EV volumes, the company has lost share in the in December 2023-February 2024 period versus April-November 23. "In Maharashtra, Ola’s market share rose just 290bps despite price cuts", an analysis by equity research firm Elara Capital said.
