Will Ola Lead The EV Revolution In India?

Ola Electric dreams of building an end-to-end electric two-wheeler ecosystem in India. With its initial public offering, which opened last week, it is closer to achieving that dream.

“...undoubtedly Ola is leading [the] EV(electric vehicle) revolution in India and is a potential frontrunner among all,” Puneet Gupta, Director at S&P Global Mobility told The Core. “The success of this IPO could indeed propel Ola towards its ambition of becoming a one-stop shop for the EV sector,” he said.

The electric two-wheeler maker’s IPO opened for subscription on Friday, August 2, and will close on August 6. On Friday, it received bids for 35% of the issue. The company is offering 808.6 million equity shares at a price range of Rs 72 to Rs 76 per share. The total issue size is expected to raise approximately Rs 6,145.56 crore, with a fresh issue of Rs 5,500 crore and an offer for sale of Rs 645.56 crore.

CEO Bhavish Aggarwal is hopeful that the IPO will be an important milestone in his company’s journey and believes that it will benefit the entire EV industry. Aggarwal told Moneycontrol in an interview, “ From an EV perspective, it's significant because it brings a lot of validation to the business of future technology and electric vehicles.”

Bidding for anchor investors opened for a day on August 1. According to a Reuters report, the IPO has drawn significant interest from institutional investors already, who bid over $2 billion for a $330 million quota reserved for big institutions. The company's expected valuation post-IPO ranges between $4.2 billion to $4.4 billion, which is lower than its previous valuation of $5.4 billion​

Leading The Charge

Ola is the first pure EV company in the country to go public. It already dominates the electric scooter market. At the end of July, its market share for the year so far stood at 42.53%.

The company launched its first electric scooter, the Ola S1, on August 15, 2021. By December 2022 it was selling the highest number of electric scooters in the country, overtaking startup competitors like Ather Energy as well as getting a headstart over mainstream OEMs like Bajaj and TVS. The company focused on scaling up production, and pushing sales volumes with competitive pricing.

But what lagged was its after-sales services. Customers also started complaining about software issues and glitches in the product. In November last year, Reuters reported how scores of Ola scooters wasted away at repair centres due to long wait times. The Core also reported how customers regularly have to protest on social media and even at their centres for redressal.

However, Aggarwal has maintained that these are small hiccups that will be resolved as EV adoption continues, and the company has focused on scaling up production.

“India needs to build its own EV paradigm, its products, and its core technology in the EV stack to become a large part of the global EV revolution and that is what our mission is,” he said in a July interview.

This year, it also rolled out its plans to expand its operations to cover cell manufacturing and components. Construction for the Ola Electric battery cell gigafactory commenced in May this year. The factory, located in Tamil Nadu’s Krishnagiri, will have a production capacity of 10 GWh per annum.

Currently, two-wheeler manufacturers in India import battery cells from China. Ola’s gigafactory would reduce reliance on China for India’s EV ecosystem.

The government has awarded PLIs (production linked incentives) for the battery production facility as well as some of Ola’s best-selling models.

From the funds raised in the IPO, Rs 1,227.6 crore will go toward expanding the cell production plant's capacity from 5 GWh to 6.4 GWh, and Rs 1,600 crore into funding product development and research. Plus, it will also use funds for capital expenditures and debt repayment.

However, the journey ahead will require not just robust financial backing, but also strategic execution to navigate the competitive landscape amidst volatility in technology and regulations, Gupta pointed out.

There has been increased scrutiny on governance recently from market regulator SEBI. “...our focus has been on making sure we have a strong board, on making sure we have readiness from a financial governance, from a strategic governance, audit governance perspective,” Aggarwal said in an interview recently.

Growing EV Industry

Despite a global slowdown, India’s electric two wheeler industry is expected to grow substantially. According to domestic brokerage Nuvama, electric two wheeler penetration will grow from 5% in FY24 to 20% in FY30.

"Array of new launches along with EV bike launches next year should enable the company to retain their market share (45% by end of Q1). Higher volumes are expected to bring in operating leverage thus reducing losses, which we believe can happen in mid-term,” said brokerage LKP Securities in its report.

Based on the rising EV penetration in the country, “we believe Ola to run the tide being the only pure play 2W EV,” it said. LKP Securities recommended subscribing to the IPO with a long term perspective, keeping a cautious view on demand.

In July 2024, Ola Electric sold 41,597 scooters, up 114% year-on-year. The company’s market share in July was 39%, but its cumulative sales for the year give it an overall 42.53% share.