Ola Electric IPO: 10 key risks investors should know before subscribing to the issue

Ola Electric Mobility Limited is a pure electric vehicle (EV) player in India that is developing vertically integrated technology and manufacturing capabilities for EVs and EV components. The company's initial public offering (IPO) is open for subscription as of Friday, August 2, and it ends on Tuesday, August 6. Investors may place bids in multiples of 197 equity shares following the minimum of 197 equity shares. Bengaluru-centered Ola Electric Mobility Limited has set a price range of ₹72 to ₹76 per equity share with a face value of ₹10 each.

In addition to a fresh issuance of equity shares up to ₹5,500 crore, the Ola Electric IPO comprises an offer for sale (OFS) of 8.49 crore equity shares by investors and promoters. Under the OFS, Ola Electric's founder, Bhavish Aggarwal, will sell around 3.8 crore shares.

The business plans to pay down debt accumulated by its subsidiary, OET; support expenditures for organic growth efforts; engage in research and product development; and use the net proceeds for general corporate reasons. Its subsidiary OCT will have to spend capital money to increase the plant's capacity from 5 GWh to 6.4 GWh, which is categorised as phase 2 of the expansion plan.

The Ola Electric IPO has set aside 75% of its shares for qualified institutional buyers (QIB), 15% for non-institutional institutional investors (NII), and 10% for retail investors.

The OLA Electric IPO's book running lead managers are Bob Capital Markets Ltd., Goldman Sachs (India) Securities Private Ltd., ICICI Securities Ltd., Axis Capital Ltd., Bofa Securities India Ltd., SBI Capital Markets Ltd., and Kotak Mahindra Capital Company Ltd. Link Intime India Private Ltd. is the registrar for this issue.

Here are some of the key risks listed by the company in its Red-Herring Prospectus (RHP):

• The company's experience producing EVs is really short. Whether they operate at a holding company level or as subsidiaries, there is no guarantee that they will be successful or cost-effective in the future.
• The business has made significant investments in technology and research and development (R&D) and plans to keep doing so. They cannot guarantee that their investments will yield profits.
• The company may encounter supply disruptions or a rise in the cost of the raw materials and components used in the production of their electric vehicles. These events could raise the price of the company's electric vehicles and have an effect on their anticipated production and delivery schedules.
• The Ola Gigafactory's cell production process and the quality of the cells produced inside may be negatively impacted by supply bottlenecks, price increases, and quality difficulties with the raw materials supplied to the firm.
• At the Ola Gigafactory, the firm may encounter a number of dangers that might impair its internal cell manufacturing capabilities.
• As of right now, the company's only source of income is the sale of a small number of electric vehicle scooter models; if the market rejects these models, its operations may suffer.
• The company's ability to effectively design, present, build, sell, and deliver new, high-quality electric car models on time and in big quantities will determine how successful it is; this may expose it to new and increasing dangers as well as problems.
• The automobile industry is very competitive and changing quickly, therefore the firm might not be able to compete successfully in it.
• In Fiscal 2024, the Ola Futurefactory of the corporation achieved a capacity utilisation rate of 49%. Our ability to take advantage of economies of scale may be limited by their Ola Futurefactory's low capacity utilisation.
• It's possible that their incompatibility with the charging infrastructures of other EV companies would discourage prospective buyers from buying their EVs.
• The condition and performance of their batteries have a major impact on how well their EVs operate. Should consumers believe that replacing the batteries in their EVs would be expensive, they could decide against buying EVs altogether.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.