Ola Electric Mobility Ltd's auditor has flagged its decision to reverse a ₹57 crore penalty provision for missed battery scheme deadlines before a formal waiver, a move that helped the electric two-wheeler maker shrink its June quarter losses.
The company, which was selected for the production-linked incentive (PLI) scheme four years ago, was mandated to invest ₹225 crore per gigawatt hour (GWh) capacity awarded within two years, a timeline that it missed. Ola sought more time to comply and included a penalty provision after a government notice in March 2025. However, it reversed the provision in the June quarter before receiving a formal waiver, prompting BSR & Co., the Indian affiliate of KPMG, to issue a qualified report on its earnings for the first time since its listing.
BSR & Co. said it could not determine whether the move was justified without receiving approval from the ministry of heavy industries (MHI) simply on the basis of its submitted application, the auditor's statement for the quarter reviewed by Mint shows.
Simply put, a qualified opinion from an auditor is generally seen as a red flag as it highlights certain aspects about the company or the results that are not in line with standard practices. Qualified opinion from an auditor is taken into consideration by large investors when voting on the company's results put up for approval.
To be sure, the auditor in this case undertook a limited review of the company's financials which is less in scope than a full statutory audit. It issued a qualified conclusion on the financial statements of the company but did not express a final audit opinion owing to the limited review.
The ₹57 crore reversal allowed the company to show narrower losses, with net loss reducing to ₹336 crore in April to June from ₹428 crore in the year ago period, its results declared post-market hours on Friday showed. Without the reversal, which reduced its expenses, the company’s net loss would have come at ₹393 crore. The company's revenue fell 45% year-on-year to ₹455 crore for the June quarter.
The provision had been created by subsidiary Ola Cell Technologies Pvt. Ltd (OCTPL) after it missed an investment milestone under the PLI scheme.
“OCTPL has reversed the entire provision and recognized a corresponding credit within other expenses in the statement of unaudited consolidated financial results and has not created any provision for the quarter ended 30 June 2026 on the basis that it had submitted a request to MHI seeking an extension of time for compliance with the investment milestone and a waiver of the related liquidated damages,” the auditor said in its report.
As no decision had been communicated by the ministry by 30 June, the auditor said it could not determine whether the reversal was justified.
“In the absence of approval from MHI granting the requested extension and waiver, we were unable to obtain sufficient appropriate audit evidence in relation to the reversal of the aforesaid provision and non-recognition of additional provision for the quarter ended 30 June 2026," the auditor said. "Consequently, we were unable to determine whether any adjustments to these amounts were necessary.”
In 2022, Ola was selected as to build 20GWh of lithium ion cell capacity under the PLI scheme. Ola later decided to limit the cell capacity to 6GWh and expand only after additional investments in the next fiscal year, in breach of the guidelines that resulted in the penalties.
While the government has not recovered those penalties yet as it typically engages with the industry to understand the reason behind the timeline miss, Ola created a provision for penalties in case they were to be recovered.
Explaining the move, Ola noted that it had created such a provision basis a 3 March 2025 notice from the government about the delays but it is now confident of avoiding the payments.
“During the current quarter, OCTPL has filed for a request for extension of timeline and waiver of liquidated damages, to MHI in respect of meeting the milestones, and has not created any further provision in this respect from April 01, 2026,” the company said in its notes to earnings, explaining the move.
“Further, based on the various discussions with MHI, the company is confident of obtaining the approval from the MHI and, accordingly, has written back the entire existing provision,” Ola added.
Shriram Subramanian, founder and managing director at InGovern Research Services, said the company’s move appears to be an example of aggressive accounting that could be seen as a red flag. “This would especially be highlighted as a red flag if they continue to record it in the annual accounts of FY27 (fiscal year 2027) even after not receiving the final approval from ministry of heavy industries,” he said.
To be sure, this is not the first time the auditor has flagged an issue with Ola Electric's related entities. BSR & Co had flagged internal financial controls issues in a qualified opinion on the FY25 results of Ola Electric Technologies Pvt. Ltd, the operating subsidiary of Ola Electric Mobility that is responsible for nearly all its revenue.
Paras Savla, Partner at KPB & Associates, a corporate advisory and chartered accountant firm, said that the auditor would need to obtain full evidence to assess whether the treatment of the provision was correct. "It may be regarded as a red flag but not as evidence by itself that the accounting is wrong," he said.
Since listing in August 2024, the company's shares have fallen 46% as against a 17% gain in Nifty Auto over the period. And the company's market share has fallen from around 35% in FY24 to 8% as of June 2026.