In a significant milestone for India’s electric vehicle (EV) industry, Ola Electric, spearheaded by Bhavish Aggarwal, has received approval from the Securities and Exchange Board of India (Sebi) for its INR 7,250 crore initial public offering (IPO). This development paves the way for Ola Electric to become the first Indian EV company to be listed on the stock market.
IPO structure and stakeholders
The approved IPO structure includes a fresh issue of equity shares worth Rs 5,500 crore and an offer for sale (OFS) of over 95 million equity shares, valued at approximately Rs 1,750 crore. Bhavish Aggarwal, Ola Electric’s founder and CEO, plans to sell up to 47.4 million shares, representing a 3.48% stake. Other significant shareholders participating in the OFS include Indus Trust, Alpine Opportunity Fund, DIG Investment, Internet Fund III (Tiger Global), MacRitchie Investments, Matrix Partners, SoftBank Vision Fund, Alpha Wave Ventures, and Tekne Private Ventures.
Market timing and valuation
While the exact timeline for the IPO launch remains unconfirmed, sources suggest that it could take place within a month, capitalising on a favourable market environment. Ola Electric is targeting a valuation between $7-8 billion, a testament to its robust market presence and growth trajectory since its inception in the EV sector in 2017.
Dominance in the EV market
Ola Electric has swiftly emerged as a leading player in the Indian EV market, boasting over 35% market share in FY24. This is a significant increase from its 21% market share in FY23, as reported by the VAHAN portal. The company’s rapid ascent in the EV segment highlights its competitive edge and strategic market positioning.
Allocation of IPO proceeds
According to the draft red herring prospectus (DRHP), Ola Electric plans to use the IPO proceeds to fund various strategic initiatives. Specifically, Rs 1,226 crore will be allocated for capital expenditure (capex), Rs 800 crore for debt repayment, and Rs 1,600 crore for research and development (R&D). Additionally, Rs 350 crore is earmarked for organic growth initiatives, reflecting the company’s commitment to innovation and expansion.
Financial performance and challenges
Ola Electric has demonstrated remarkable revenue growth, with total revenue soaring by 510% to Rs 2,782 crore in FY23, up from Rs 456 crore in FY22. This includes revenue from operations and other income. The company’s earnings before interest, taxes, depreciation, and amortisation (Ebitda) improved from a loss of 157% in FY22 to 43% in FY23. However, the company did not disclose specific loss figures.
Media reports indicate that Ola Electric’s net loss nearly doubled to Rs 1,472 crore in FY23, compared to Rs 784.1 crore in the previous financial year. This increase in losses is attributed to a significant rise in expenses, which totalled Rs 3,383 crore in FY23, up from Rs 1,240 crore in FY22. The company reported an Ebitda loss of Rs 1,318 crore for FY23, highlighting the financial challenges accompanying its rapid expansion.
Why this IPO matters?
The IPO of Ola Electric is noteworthy for several reasons. Firstly, it marks the first time in decades that a two-wheeler manufacturer is entering the public market in India. Secondly, this is Bhavish Aggarwal’s first venture into taking a company public, adding to the significance of this event. The IPO is also a crucial step in Ola Electric’s journey, providing the necessary capital to support its ambitious growth plans and solidify its leadership position in the EV market.
The road ahead
The approval of Ola Electric’s IPO by Sebi is a pivotal moment for the Indian EV industry. As the company prepares to go public, it faces the dual challenge of maintaining its market dominance while addressing financial losses. The planned investments in capex, debt repayment, and R&D are strategic moves aimed at ensuring sustainable growth and innovation.
Ola Electric’s journey to becoming a publicly listed company is a landmark event in India’s automotive industry. The IPO not only underscores the company’s growth and market leadership but also sets the stage for future innovations and expansions. As Ola Electric gears up for its IPO, the industry’s eyes are on how it navigates the challenges and opportunities that lie ahead.
This IPO represents a significant milestone for the Indian EV sector, potentially inspiring other players to follow suit and further accelerating the country’s transition to electric mobility.