Ola Electric IPO Opens For Subscription: Is the Year's Biggest Issue Worth Investing?

The much-awaited IPO of the year, Ola Electric, kicked off today with subscriptions open for a period of four days from August 2 to August 6, 2024.

The Bhavish Aggarwal-led firm which reportedly holds a substantial share in the the EV market in the India focuses on manufacturing Electric Vehicles (EVs) and its components, including cells.

It is set to issue shares worth Rs 6150 crore, consisting of Rs 5500 crores in fresh issues and Rs 650 crores in Offer for Sale (OFS). 

The price of a single share is Rs 72-76. On Friday, the shares were trading with a grey market premium of around Rs 15-16.

The registrar of Ola Electric's IPO is Link Intime India. The book-running lead managers for the public issue includes BofA Securities India, Goldman Sachs (India) Securities Private, Kotak Mahindra Capital Company, Axis Capital, SBI Capital Markets, Citigroup Global Markets India, BoB Capital Markets, and ICICI Securities.

It is stated that the leading manufacturer of Electric Vehicles (EVs) in the Indian market would be utilising the funds for the expansion of its Gigafactory and scooter Business, Research and development of its products, and repayment of its debt.

The company is likely to allocate Rs 1200 crore towards the expansion of its Gigafactory capacity by 2025, with the facility currently in a testing phase of 1.5 GWH. It also aims to commission phase 2 of its Gigafactory expansion with a capacity of 5GwH, hoping to scale it further to 20GwH in the next few years.

Ola is also in the process of developing its own batteries especially for its scooter business as batteries account for 30-40 per cent of the material, which can help substantially with its profit margins. The firm is also availing the government’s PLI for helping it mitigate the cost of its scooter business.

With Rs 350 crore being set aside for expansion of its scooter business, the company believes that it can increase the demand for it up to 35-40 per cent by FY30. The penetration of EV scooters currently stands at 15 per cent in the country.

In addition, sum of Rs 1600 crore would be used for investing in research and development of its products with Rs 800 crore towards repayment of debts.

With EV vehicles being in high demand across the world with transition towards a greener future, the company is hoping to lay inroads into markets of Asia, LATAM and Africa hoping to cater them in the longer run.

Is the IPO Worth Investing: Here's what the experts suggest

Talking about the prospects of Ola Electric’s IPO, there are many brokerage firms who have expressed their views on the company's public listing so that investors can get a clarity on the company's performance and assess them.

Brokerage firm Prabhudas Lilladhar says that Ola has created a strong position for itself in the electric scooters market and is in the process of making itself as one of the key players in the battery business in India. "While the business outlook and growth prospects look promising, its journey towards profitability could be a key thing to look at as we believe its scooters and battery business are 2-3 years away from breakeven and sustainable profitability," it added.

Analysts at Anand Rathi Research suggest that with the share's upper price band, the company is valued at a Market cap/Sales ratio of 6.6x with a market cap of Rs 33,522 crore post-issue of equity shares. 

“Currently, top global automobile entities are trading between 1-8x Marketcap/Sales.  Therefore, on the valuation front, we believe that the company is richly priced. Thus, we recommend a 'Subscribe – long term' rating to the IPO with a higher risk appetite," said the brokerage.