Ola Electric, headed by Bhavish Aggarwal, is speculated to conduct its highly anticipated initial public offering (IPO) as soon as the first two weeks of August.
An Indian electric two-wheeler supported by Japanese investor Softbank is reportedly aiming to raise $740 million through a mix of a new offering and an initial public offering (IPO), with a post-money valuation of $4.25 billion to $4.75 billion in mind, according to a media agency’s report.
SEBI’s Approval
Last month, the Securities and Exchange Board of India (SEBI) gave Ola Electric the green light to launch its INR 7,250-crore initial public offering (IPO). On December 22, 2023, the IPO’s draft red herring prospectus (DRHP) was sent to SEBI.
An offer for sale (OFS) of INR 1,750 crore and a fresh issue of INR 5,500 crore are expected to be part of the IPO, bringing the total to INR 7,250 crore. According to the DRHP, 95.19 million OFS shares were going to be sold by current shareholders. With the combined sales of 47.89 million shares, initial investors such as AlphaWave, Alpine, DIG Investment, Matrix, and others will contribute to founder Bhavish Aggarwal‘s 47.3 million share projection.
The goal of the public offering for the Bengaluru-based company is to reach a valuation of $6 billion. The initial public offering (IPO) will allow Ola Electric to launch the Ola Gigafactory initiative, which will produce electric vehicles, batteries, and other components with a large-scale production capacity of 100 GWh.
How This Move Will Change the Dynamics of the EV Sector?
With the potential to attract more investments and promote innovation, Ola Electric’s IPO might be a game-changer for the Indian EV market. More money will come into the electric vehicle market in India after the IPO, which is expected to attract a lot of interest from investors both at home and abroad. Greater investment has the potential to speed up R&D, which could lead to better electric vehicle (EV) infrastructure and technology.
The Indian EV market may see a rise in competition as a result of the IPO. Both long-standing businesses and young companies might step up their game to gain a larger slice of the market, which could lead to more innovation and cheaper prices for shoppers.
Pricing may become more affordable as a result of increased production-related benefits of scale and increased levels of competition. Because of this, a higher number of individuals would be able to explore electric scooters as a more accessible and practical alternative.
In a groundbreaking move, OLA Electric, the renowned electric vehicle (EV) manufacturer, is gearing up for its much-anticipated Initial Public Offering (IPO). This milestone event is poised to make history, representing the first IPO by an automaker in India in over two decades. The last instance dates back to 2003 when Maruti Suzuki (then Maruti Udyog) embarked on a similar venture.
In a recent triumph, OLA Electric secured a substantial Rs 3,200 crore in October of this year, employing a strategic mix of equity and debt. The majority of this funding is dedicated to accelerating the establishment of an EV manufacturing unit and a cutting-edge battery facility within its gigafactory situated in Tamil Nadu. This gigafactory, set to commence operations in early 2024, holds immense significance in OLA Electric’s overarching mission to contribute to the environmental cause by spearheading the decarbonization of the transportation sector.
The impending IPO, aiming to raise a formidable $700 million, has the potential to value OLA Electric between an impressive $7 billion and $8 billion. This valuation marks a notable leap from previous funding rounds, triggering a wave of scrutiny from market experts who are expressing concerns about the rapid surge in valuation.
One key aspect under the microscope is the imperative for OLA Electric to chart a clear path to profitability and sustained growth. The company faces the challenge of justifying a substantial $2–3 billion increase in valuation within a remarkably short span of two months. As OLA Electric prepares to file its Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) in the coming days, the anticipation is palpable.
Market analysts are scrutinizing the critical factors contributing to this surge in valuation. The company is under pressure to present a comprehensive view of its trajectory, outlining a strategic roadmap that not only ensures profitability but also underscores its commitment to sustainable growth in the burgeoning EV market.
This IPO holds immense significance not only for OLA Electric but also for the broader landscape of the Indian automotive industry. As the company navigates this pivotal moment, stakeholders, investors, and industry enthusiasts await insights into OLA Electric’s financial strategy, growth prospects, and its role in shaping the future of electric mobility in India. The success of this IPO could set a precedent and pave the way for further innovations and investments in the electric vehicle sector, contributing to the nation’s broader environmental goals.
Bhavish Aggarwal, the founder of OLA Electric, unveiled ambitious plans during the company’s annual event on August 15 last year. The revelation included groundbreaking initiatives such as the development of a new indigenously produced lithium-ion battery, coupled with OLA’s visionary goal to position India as a global Electric Vehicle (EV) hub. This event also shed light on the eagerly awaited details of OLA’s upcoming electric car.
In the calendar year 2023 alone, OLA Electric achieved remarkable success by selling over 2.4 lakh vehicles, securing a substantial 35% market share. Looking ahead, the company is poised to further enhance its capabilities with the launch of a giga factory dedicated to lithium-ion cell manufacturing, scheduled to commence operations by February.
Financial Resilience and Stakeholder Structure
OLA Electric has exhibited financial resilience, demonstrating a noteworthy evolution in its gross margin. Progressing from a negative margin of -5.4% in FY22, the company achieved a positive 7.63% margin in FY23. As part of its strategic roadmap, OLA Electric aims to attain EBITDA profitability by FY25, targeting a commendable profit margin of 6.6%.
Bhavish Aggarwal commands a substantial 37% stake in the company. Other key stakeholders include industry giants like SoftBank at 23.6%, Tiger Global at 6.3%, ANI Technologies, OLA (each at 4.7%), Matrix Partners at 3.8%, and Alpha Wave Global at 3.6%.
Total Expenses of Ola Electric Mobility From Financial Year 2020 to 2022
Innovations Beyond Wheels: Krutrim AI and Future Prospects
Bhavish Aggarwal’s recent launch of Krutrim AI on December 15 positions OLA Electric at the forefront of innovation. Touted as India’s first full-stack AI, Krutrim AI emphasizes unique localization, supporting 20 Indian languages with over 2 trillion tokens. The model aspires to shape a culturally expressive future for India, driving an AI-first economy and challenging global paradigms.
Ambitious Targets and Market Dynamics
OLA Electric sets ambitious targets, planning to sell 9 lakh units in 2024-25 and further escalating to 2.3 million units in 2025-26, as per a Reuters report. These goals, although lower than earlier estimates, align with the evolving market dynamics and changing incentives.
OLA Electric’s strategic initiatives extend beyond two-wheelers, with plans to launch a giga factory for lithium-ion cells by February 2024. Additionally, the company contemplates introducing a 500km range electric car by late 2024, signaling its commitment to diversify its product portfolio. Notably, OLA is also in the testing phase for an autonomous vehicle, showcasing its commitment to cutting-edge technological advancements.
CEO Insights and the Sequential Roadmap
Bhavish Aggarwal’s grand vision for OLA Electric involves not just two-wheelers but an entire spectrum, including scooters, motorbikes, cars, and the fundamental cell platform. The sequential roadmap envisions the progression from scooters to motorbikes and eventually cars. Concurrently, the company remains focused on enhancing cell technology.
Aggarwal boldly stated that by the end of 2025, OLA Electric aims to make all two-wheelers in India electric. Acknowledging the ambitious nature of this goal, Aggarwal emphasized the need to develop the right products for India, ensuring cost-effectiveness and bringing supply chains into the country.
Navigating Challenges in a Competitive Landscape
While OLA Electric celebrates its successes, challenges loom on the horizon. Maintaining a market lead in the face of fierce competition from players like TVS, Bajaj, Hero, and Ather remains a critical objective. The company also grapples with the task of reducing losses post-subsidy reductions and addressing after-sales issues more effectively.
Strategic Delays and Market Expectations
To meet market expectations and justify its valuation, OLA Electric faces the challenge of demonstrating its ability to launch viable products across different segments. Recent hints from Aggarwal suggest a potential delay in the launch of OLA’s electric car until early 2025, aligning with the company’s strategic approach.
OLA Electric’s Dynamic Journey
OLA Electric’s journey is marked by innovation, strategic planning, and the pursuit of an ambitious vision. As the company navigates challenges and seeks to establish itself as a global EV hub, stakeholders, market analysts, and enthusiasts await the unfolding chapters in this dynamic narrative. The IPO, with its substantial valuation, sets the stage for OLA Electric’s continued growth and its pivotal role in shaping the future of electric mobility in India.
Nadeesh Kareemdathil
