Ola Electric IPO Review :The IPO of electric scooter maker Ola Electric will open on August 2 and close on August 6. The company has fixed the price band for the IPO at Rs 72-76 per share. The size of the IPO is Rs 6150 crore. Apart from fresh equity, it also has OFS. It will be listed in the stock market on August 9. This IPO will open for anchor investors on Thursday i.e. August 1. The brokerage house has given 5 big reasons to subscribe to this IPO.
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Rating : Subscribe for long term
Brokerage house LKP Securities has advised to subscribe to Ola Electric Mobility’s IPO for a long term. The brokerage has cited some reasons behind this.
1. Being the market leader in the domestic EV 2W industry, Ola is able to take advantage of any positive growth in it. The speed at which the company has moved forward to reach this milestone is commendable.
2. The vision of becoming a one stop shop for the EV industry by providing the latest technology, latest infrastructure including battery manufacturing should augur well for future growth.
3. Although the company is running in losses at the operational level, the loss margin is decreasing (from 47.6% in FY23 to 25.3% in FY24). The company’s losses are expected to reduce going forward.
4. Ola’s earnings have also grown by 90 percent in FY 2024. The company has also received PLI for some of its best-selling models and its battery manufacturing unit. This will help Ola improve its profitability in the coming years.
5. A range of new launches along with EV bike launches next year should enable the company to retain its market share (45% at the end of Q1 vs 39% at the end of Q4). Higher volumes are expected to bring operating leverage which will reduce losses, which could be in the mid-term.
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IPO: 5 major risks
1. The company continues to suffer losses
2. Limited Operations History
3. Supply and pricing risk
4. Cost of research
5. Amendments in government policies not being favorable to the company
About IPO
Fresh equity shares worth Rs 5500 crore will be issued in Ola Electric IPO. There will be an Offer for Sale (OFS) of 95,191,195 shares i.e. about Rs 646 crore. In OFS, promoter Bhavish Aggarwal will sell 3.79 crore equity shares and Indus Trust will sell 41.79 lakh equity shares. This IPO includes 18.33 percent of the paid-up capital and after this the promoter’s stake will decrease from 45.14 percent to 36.8 percent.
The company’s valuation is pegged at Rs 33,522 crore at the price band of Rs 72-76/share. This is at a huge discount to the valuation of the fund raising in December 2023. In December 2023, Ola Electric raised Rs 1,163.20 crore in Series E-funding at a valuation of Rs 47,932 crore or $5.7 billion, bringing the company’s stock to around Rs 130 per share. The EV maker is valued at $4 billion at IPO pricing, which is about a 30 per cent discount to the previous round of funding.
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Ola Electric GMP : 20%
Even before the IPO opens, there has been a stir in the grey market regarding Ola Electric. The company’s unlisted stock is at a premium of Rs 15 in the grey market. This is a 20 percent premium in terms of the upper price band of Rs 76.
How much reserve for whom
In Ola Electric’s IPO, 10 percent share has been reserved for retail investors. At the same time, 75 percent share is reserved for qualified institutional buyers i.e. QIB, while 15 percent share has been reserved for non-institutional investors i.e. NII.
How are the company’s financials
Talking about the finances of Ola Electric, the company’s revenue and expenditure in FY 2021 was Rs 106.08 crore and Rs 284.90 crore. The company suffered a loss of Rs 199.23 crore in that financial year. In FY 2023, the company’s revenue and expenditure was Rs 2782.70 crore and Rs 3883.38 crore, i.e. the company suffered a loss of Rs 1472.08 crore. Whereas in the first quarter of FY 2024, the company’s revenue, expenditure and loss stood at Rs 1278.68 crore, Rs 1460.72 crore and Rs 267.16 crore.
Where will the funds be used
The funds raised from the IPO will be used for capex, loan repayment, investment in research and development, and expenditure for organic growth.
(Disclaimer: Advice or information regarding investing in shares is given by the brokerage house. These are not the personal views of Financial Express. There are risks in the market, so take expert advice before investing.)
