Ola Electric IPO Valuation and Views : The IPO of electric scooter maker Ola Electric has opened today on 2 August and can be subscribed till 6 August. 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 9 August. The review of the brokerage house is positive about the IPO and they are advising to subscribe for the long term.
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SBI Securities on Growth Strategy
• India centric EV products with India first strategy
• Continue to invest in research and development to advance technological capabilities and optimize costs
• Creation of an EV hub with vertically integrated manufacturing and supply chain to improve cost efficiency.
• Developing cell technology and strengthening in-house manufacturing capabilities.
• Expanding product portfolio to enhance market penetration.
• Strengthening the D2C omnichannel network across sales, services and charging.
• Efficient allocation of capital and focus on growth.
• Strongly positioned to capitalise on global EV opportunities.
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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.
• Being the market leader in the domestic EV 2W industry, Ola is well placed to benefit from any positive growth in the industry. The speed at which the company has grown to reach this milestone is commendable.
• Vision to become a one stop shop for the EV industry by providing latest technology, latest infrastructure including battery manufacturing should augur well for future growth.
• Although the company is running in losses at the operational level, the loss margin is reducing (from 47.6% in FY23 to 25.3% in FY24). The company’s losses are expected to reduce going forward.
• 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.
• 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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Rating : Subscribe if you can take risk
Brokerage house Anand Rathi has advised only risk-taking investors to subscribe to the IPO for the long term.
• According to the brokerage, at the upper price band, the market capitalization/sales ratio of the company is 6.6 times and after the issuance of equity shares, the market capitalization is Rs 33,522 crore.
• The brokerage says that top global automobile entities are trading between 1-8x market cap/sales. Hence, on the valuation front, the company looks overvalued. Hence, only those with a high risk appetite should invest in the IPO for the long term.
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
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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.
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. 10 percent of Ola Electric’s IPO has been reserved for retail investors. At the same time, 75 percent of the share is reserved for Qualified Institutional Buyers i.e. QIB, while 15 percent of the share has been reserved for Non Institutional Investors i.e. NII.
(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.)