Companies
IPO-bound Ola Electric slashes valuation to $4 billion
Summary
- The Bhavish Aggarwal-led company plans to raise ₹6,146 crore by selling investors an ecosystem-led electric vehicle growth story, with investments in making cells and components.
Mumbai: Ola Electric’s public offer will open for subscription on Friday with a price band of ₹72-76 per share, valuing the company at $4 billion ( ₹33,522 crore) at the upper end, a sharp discount to the $5.4 billion valuation it commanded in its last private funding round in September.
The Bhavish Aggarwal-led company is looking to raise ₹6,146 crore by selling investors an ecosystem-led electric vehicle (EV) growth story, with investments in making cells and components. Of this, ₹5,500 crore will be raised through the issue of fresh equity while about ₹646 crore will be through an offer for sale by existing shareholders.
The company is the market leader in the electric two-wheeler segment in India, commanding a 35% market share in FY24 with the sale of just under 330,000 units. Its revenues in FY24 surged 90% over the previous year to ₹5,010 crore.
However, the surge in revenue was accompanied by an increase in losses, which grew 8% year-on-year to ₹1,584 crore in FY24.
Read more: Five important points that show EVs are hitting their stride in India
Aggarwal claims that an increase in sales will help the company achieve better efficiencies of scale, narrowing its losses. The company’s loss margins have already narrowed from -43% in FY23 to -20% in FY24.
Experts found Ola Electric’s ₹33,522-crore valuation reasonable after projecting the number of vehicles the company could sell over the next five years and the overall electrification of the automotive market.
“It is fairly priced. But that also means there is not much upside," said an analyst tracking the automotive industry. He declined to be named.
When questioned about the dip in valuation, Aggarwal, the company’s founder and chair, painted it as an altruistic decision.
“Our philosophy for this company has been very focused on the long term. And that's why when we decided the price, our whole focus was to make sure we are leaving enough money on the table for investors," he told Mint on Monday.
In September 2023, Singapore’s Temasek led a $140 million funding round in Ola Electric that valued the company at $5.4 billion, Mint earlier reported.
Read more: The ICE age will last: The road to EV adoption looks bumpy
The discount in the company’s valuation coincides with Aggarwal publicly admitting that the electric car showcased in August 2022 was not a part of Ola Electric’s current plans. The company had showcased a virtual rendering of an electric car on 15 August 2022 that was “set to arrive in 2024."
“We've never formally communicated any timeline for our car beyond the fact that two years ago we showcased our aspiration product," Aggarwal said, disputing the timeline mentioned in the video which is still available on Ola Electric’s YouTube channel.
The company is focused on its two-wheeler programme and on cell manufacturing as the foundation of its EV ecosystem, he said. “That remains our focus. Beyond that, I can't comment on any products or programmes today."
Similarly, on 15 August 2023, while showcasing prototypes of its motorcycles, the company gave a timeline of “end 2024" for the products. Aggarwal claimed that the company is adhering to this timeline. He hinted that new announcements will be made on 15 August this year, in line with the company’s annual tradition, but did not clarify further.
“On the bike, when we announced last year, we gave a timeline of ‘end of 2024’. In our DRHP also it is ‘end of 2024’ and that is the timeline today also. So again, I can't be more specific than that. But broadly, we are in that timeline range," Aggarwal said.
However, in its red herring prospectus, Ola Electric said it will begin deliveries of the motorcycles from the first half of FY26.
