Can Ola Electric Cruise to 6,146 Cr IPO?

Samie Modak, Shivani Shinde, Sohini Das

The country's largest electric two wheeler (e2W) player Ola Electric is going for the biggest IPO of the year, so far, aiming to raise Rs 6,146 crore ($734 million).

Around 150 companies in the country have already gone public this year in a bid to raise a total of $5 billion, double the amount raised during this period last year, according to estimates.

The Softbank-backed company has set a price band of Rs 72 to Rs 76 per share for the maiden share sale and is expected to test the appetite for new-age loss-making companies.

At the top-end of the price band, Ola will be valued at Rs 33,522 crore ($4 billion) on a post-diluted basis. The company's IPO will open on August 2.

Founder and CEO Bhavish Aggarwal, who's charting a path to profitability for Ola Electric, told reporters at the IPO press conference in Mumbai that volume growth and vertical integration would be the main pillars for improving the company's margins.

Through the IPO, the Bengaluru-based firm is looking to issue fresh shares worth Rs 5,500 crore, which will be utilised to repay debt, expand its gigafactory and used for research and development.

The Offer for sale (OFS) portion of the issue is only Rs 646 crore (Rs 6.46 billion), of which Aggarwal's share is Rs 288 crore (Rs 2.88 billion). About nine other investors are selling stakes, including Tiger Global (Rs 48 crore/Rs 480 million) and Softbank (Rs 181 crore/Rs 1.81 billion).

Alpine Opportunity and Tekne Private are offloading small quantities at a loss as their acquisition cost is over Rs 111 per share.

Following the IPO, the promoter shareholding in the company will decline from nearly 45 per cent to 36.78 per cent.

Investment bankers said the pricing of the IPO is based on investor feedback. They expect strong responses from domestic as well as foreign mutual funds.

According to Reuters report citing sources, the IPO is set to draw bids from Fidelity, Nomura and Norges Bank as well as several Indian mutual funds.

Aggarwal said: "The India EV story is still in early days. Three years ago, when we launched our products, that is when I believe the EV story began.

"We see the EV market only expanding. You also see the incumbents, who three years back said there is no EV story, are also joining the segment."

When asked about the drop in sales and even the global EV segment going through a slowdown, Aggarwal said like other industries this would go through a cycle.

"There will be cyclical ups and downs, either subsidy changes or some cyclical seasonal stuff," he said.

Ola Electric's gross margins have improved from 5.4 per cent in FY22 to 7.63 per cent in FY23 and 16.47 per cent in FY24. Its volumes have grown from 156,000 units in FY23 to 330,000 units in FY24.

Ola Electric currently sources cells from third party suppliers. It has started trial runs at the gigafactory in Tamil Nadu where phase 1 of the project was completed in May (1.4 GwH capacity).

It has developed a cell technology around the 4680 form factor for which it has received BIS certification in May, which will be used in existing and future products.

The gigafactory will have a capacity of 20 GwH (in four phases). Ola Electric is also in line for the Cell PLI (production-linked incentive) scheme.

It has already received certification for the S1 Pro product under the PLI scheme and is currently filing for the first claims to the Centre.

The company's 2,000-acres EV hub in Krishnagiri and Dharmapuri districts of Tamil Nadu, which houses the 'futurefactory' and the gigafactory, along with co-located suppliers, will help achieve greater efficiency.

Aggarwal said the company would start delivering motorcycles by early next year. It had showcased four motorcycle models -- Adventure, Cruiser, Roadster and Diamondhead -- last August.

Meanwhile, on August 15, the company plans to unveil more two-wheeler models.

As India expects to grab a larger share of two-wheeler exports, Aggarwal is betting big on Ola Electric for a smooth drive.