Electric is set to achieve many significant milestones with its initial public offering (IPO). Notably, Ola will become the first Indian electric vehicle (EV) maker to secure funds from public investors, marking a historic move in the country’s growing EV sector. Also, the IPO stands out as the first undertaken by an automobile company in the last two decades.
The IPO is structured to include both fresh issues and an offer for sale. Ola Electric aims to raise Rs 5,500 crore through the issuance of fresh equity shares. In the offer for sale (OFS), up to 95,191,195 equity shares will be made available, with promoters and existing investors participating in the offering.
Promoter Bhavish Aggarwal will divest more than 4.73 crore shares, while the promoter group Indus Trust plans to reduce its stake by over 41.78 lakh shares. Also, Aggarwal’s cost of share acquisition was negligible, and the Trust’s acquisition cost was zero. Leading investors participating in the share offering include Softbank Group, which intends to sell over 2.38 crore shares, along with Matrix Partners, Tiger Global, and Alpha Wave Ventures II.
As of now, Bhavish Aggarwal holds a 36.94% stake in Ola Electric, while Indus Trust owns a 3.85% stake. Softbank Group’s stake stands at 21.98%, Tiger holds a 6.03% stake on a pre-offer basis, and Matrix Partners owns a 3.51% stake.
The book-running lead managers overseeing the IPO include Kotak Mahindra Capital Company, BofA Securities, Axis Capital, SBI Caps, CitiGroup Global Market India, Goldman Sachs (India) Securities, and BOB Capital Markets. The registrar for the issue is Link Intime India.
The allocated funds from the IPO will be utilized strategically. Out of the Rs 5,500 crore raised from the fresh issue, Rs 1,200 crore is marked for capital expenditure in subsidiary Ola Cell Private Technologies to enhance cell manufacturing capacity at Ola Gigafactory.
Additionally, Rs 1,600 crore is designated for research and development, while Rs 800 crore will be directed towards settling certain debts of subsidiary Ola Electric Technologies. An allocation of Rs 350 crore is categorized for organic growth and general corporate purposes.
Examining Ola Electric’s financials, the company reported revenue from operations amounting to Rs 1,242.74 crore for the quarter ending in June. The revenue for the fiscal year 2023 totaled Rs 2,630.92 crore, a substantial increase from Rs 373.42 crore in the previous fiscal year and Rs 86 lakh in FY21. However, Ola Electric also reported a net loss of Rs 267.15 crore in the June quarter, with the net loss for FY23 reaching Rs 1,472 crore, up from Rs 784 crore in FY22.
While the IPO presents promising opportunities, it is important to acknowledge certain risks associated with Ola Electric. These include the company’s limited operating history, persistent losses, and negative cash flows from operations.
Additionally, potential challenges such as defects, quality issues, or disruptions in the supply chain, along with fluctuations in the prices of components used in electric vehicles, could impact manufacturing projections, delivery timelines, and overall earnings. Investors should carefully consider these factors before participating in the IPO.