Ola Electric‘s initial public offering (IPO) received bids worth $1.8 billion, marking a significant milestone as the first stock offering by a pure-play electric vehicle (EV) maker in India. The $734 million IPO, supported by SoftBank, became India’s largest this year, with bids for 1.99 billion shares, roughly 4.3 times the shares available, according to exchange data.
The IPO has allowed investors to participate in Prime Minister Narendra Modi’s clean energy initiative, with the company expected to achieve a valuation of approximately $4 billion, as indicated by a recent term sheet. However, this valuation is about 25% lower than Ola Electric’s last funding round in 2023, influenced by a global correction in tech company valuations and the company’s strategy to attract more participants.
Institutional investors, including foreign entities, banks, and mutual funds, oversubscribed their portion by 5.3 times, while retail investors bid for 3.9 times their allocated shares. Ola Electric remains the leading player in India’s EV market, holding 46% of the e-scooter segment as of June 30, despite reducing its sales targets the previous year.
Analysts have raised concerns about Ola Electric’s rising costs and profitability path. Narendra Solanki of Anand Rathi Shares and Stock Brokers noted the company’s significant capital requirements, particularly for its battery cell manufacturing unit, which will take time to scale up. Despite a 90% increase in revenue, Ola Electric’s losses grew by 8% in the fiscal year ending March 2024 due to higher raw material costs.
Founded in 2017, Ola Electric intends to allocate about $150 million of its IPO proceeds to the cell manufacturing unit, which is crucial to its profitability plans, as stated in the company’s prospectus. The IPO subscription was lower than the previous five IPOs, such as Emcure Pharma, which saw oversubscriptions between 20 and 80 times.
The company did not respond to Reuters’ request for comment. A recent global equity sell-off affected overall sentiment in the otherwise robust domestic stock market, which has seen 150 companies raise nearly $5 billion this year. Local exchanges declined by 2.7% on Monday and 0.3% on Tuesday.
Featured Image courtesy of Bloomberg
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