Ola Electric IPO: Will the electric two-wheeler maker become one-stop shop for EV industry? Here’s what analysts say

On Friday, August 2, the Softbank-backed two-wheeler manufacturer Ola Electric MobilityIPO is all set to launch for subscriptions on D-Street. The subscription period for the company's issue, with a price range of ₹72–76 per equity share, will end on Tuesday, August 6.

The Ola Electric IPO consists of an offer for sale (OFS) of 8.49 crore equity shares by investors and promoters, in addition to a new issue of equity shares up to ₹5,500 crore. Bhavish Aggarwal, the founder of Ola Electric, would sell about 3.8 crore shares under the OFS. Investors may place bids for up to 197 equity shares, and then in multiples of that number.

Among all the electric vehicle (EV) two-wheeler (2W) manufacturers in India, Ola Electric Mobility is the leading player with the greatest revenues, said brokerage LKP Securities in its report.

The company is developing vertically integrated technology and production capabilities for EVs and EV components, including cells. At the Ola Futurefactory, the firm produces electric vehicles (EVs) as well as some essential EV parts like motors, battery packs, and vehicle chassis. Ola's operations concentrate on seizing the potential presented by India's electrification of transportation and look for future chances to sell EVs to specific foreign markets.

Of the entire funds raised through the initial public offering (IPO), ₹1,227.6 crore will go toward expanding the cell production plant's capacity from 5 GWh to 6.4 GWh, and ₹1,600 crore will go into funding product development and research. In addition, the business plans to utilise ₹350 crore for organic development efforts and ₹800 crore to pay down its current debt.

Ola’s Market Leadership and Focus on EVs in India

Ola Electric is able to profit from the quickly expanding Indian two-wheeler sector because of their exclusive and unwavering emphasis on EVs. The Redseer Report states that Ola accounted for almost 35% of all electric two-wheeler (E2W) registrations in India in FY 2024, making it the top seller of E2Ws in that country.

The brokerage claims to be a pure-play EV company, focusing all of its R&D, technology, and internal design, engineering, and production on the creation of EV goods. They do not have to devote financial or operational resources to internal combustion engine (ICE) technologies because they are a greenfield EV firm.

The Redseer Report projects a substantial increase in the penetration of electric two-wheelers (E2W) in India, with E2W sales volume expected to rise from 41% to 56% of domestic two-wheeler sales volume by FY 2028, from around 5.40% of domestic two-wheeler registrations registered on the VAHAN site in FY 2024.

Will Ola Electric achieve its goal of becoming a one-stop shop for the EV industry?

The goal of being a one-stop shop for the electric vehicle sector by offering cutting edge technology, cutting edge infrastructure, and battery production should bode well for future expansion. Notwithstanding this, brokerage LKP Securities is aware that the business is experiencing operating-level losses, although to a lesser extent (from 47.6% in FY23 to 25.3% in FY24).

Ola's top line increased by an incredible 90% in FY24 as well. The business has received PLI awards for both its battery production facility and a few of its best-selling models. This will help Ola increase their profitability in the years to come, believes the brokerage.

"Array of new launches along with EV bike launches next year should enable the company to retain their market share (45% by end of Q1 v/s 39% at the end of Q4). Higher volumes are expected to bring in operating leverage thus reducing losses, which we believe can happen in mid-term. Reduction in battery costs should also help the cause.

Therefore, based on the narrative of EV proliferation in the country (current EV scooter penetration at 15%), we believe Ola to run the tide being the only pure play 2W EV. Therefore, keeping an eye and a cautious view on the demand and thereby the reduction in losses for Ola, we recommend to SUBSCRIBE this IPO with a long term perspective," said LKP Securities in its report.

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