EV Race is About Heat Up. Ola Electric IPO To Hit the Street Soon

Indian benchmark indices in 2023 have been on nothing less than a roller coaster ride.

The year kicked off with the Adani-Hindenburg saga, sending tremors to the market. This was further intensified by geopolitical tensions of the Canada-India spat and the Israel-Palestine conflict.

Amid this, one sector that stood as a beacon of promise and prosperity is electric vehicles (EVs) sector.

2023 hasn't just seen EVs chugging along, they've hit the express lane.

This hype has piqued the interest of investors, intensifying the focus on EV IPOs as they eagerly anticipate opportunities in this thriving industry.

In alignment with this trend, an Indian pure-play EV maker, Ola Electric, has filed for an IPO and it looks to go public soon.

#1 About the company

Founded in 2010, Ola is the biggest mobility platform in India.

It is one of the biggest ride-hailing entities in the world, operating in over 250 cities across the UK, New Zealand, Australia, and India.

Its D2C omnichannel distribution network comprises an integrated company-owned sales and service network, a charging network, and an online retail platform.

The company's app facilitates mobility services by offering a variety of vehicles such as cabs, metered taxis, auto-rickshaws, and bikes.

With its transparency and convenience, this company has a large customer base and more than 1.5 million empowered driver-partners.

Through data sciences and engineering, the platform ensures a steady back-end system and offers a comfortable experience to the driver-partners and riders.

The company plans to raise Rs 55 billion (bn).

#2 Factors Setting this IPO Apart

• Ola Electric is India's first electric vehicle (EV) maker to launch an IPO, Ola Electric paves the way for other EV startups and solidifies its position as a leader in the rapidly growing Indian EV market.
• The last IPO in the Indian automobile sector was Maruti Suzuki in 2003. Ola Electric's IPO breaks this long gap, highlighting the changing landscape of the automobile industry and the increasing emphasis on sustainable mobility solutions.
• Ola has emerged as a successful platform, with over 1 bn rides served each year.
• According to the Redseer Report mentioned in the DRHP, in FY 2023, the company topped the charts among Indian incorporated electric 2-wheelers (E2Ws) and original equipment manufacturers (OEMs) in terms of revenue from E2W sales.
• The Indian electric vehicle market is projected to grow exponentially in the coming years, with estimates suggesting a tenfold increase by 2030. This presents a significant opportunity for Ola to capture a larger share of a rapidly expanding market.

#3 A Look at its Financials

For the FY year 2023, the company's total revenue increased more than six times to 27.8 bn from Rs 4.6 bn a year ago.

Between FY21 and FY23, the company has posted a CAGR growth of 193.4% in its revenue.

This growth was on the back of rising demand.

However, the company's net loss nearly doubled to Rs 14.7 bn in FY23, from Rs 7.8 bn in the previous year, as expenses surged significantly.

Ola Electric's net losses stem from high initial investments and aggressive expansion strategies.

Ola Electric Financial Snapshot (2021-23)

Particulars	31-Mar-21	31-Mar-22	31-Mar-23
Total Revenue (Rs in bn)	1.1	4.6	27.8
Revenue Growth (%)	-	318%	505%
Net Loss (Rs in bn)	-1.9	-7.8	-14.7
Net Worth (Rs in bn)	19.7	36.6	23.6

Data Source: Equitymaster

Going forward, company plans to continue investing into research and product development and leverage our R&D and technology for developing motor and drivetrain, electronic architecture, and more.

#4 Arguments in Favor of the Business

• The company has also been approved for India’s PLI schemes - one relating to the manufacturing of advanced automotive technology products (Automobile PLI Scheme) and another relating to advanced cell chemistry batteries (Cell PLI Scheme).
• Ola is aggressively building its production facilities, aiming for large-scale output. This direct control over manufacturing allows for cost optimization, faster adaptation to demand, and a stronger grip on quality control.
• Ola's focus on platform-based design and development streamlines vehicle creation and ensures efficient resource allocation. This approach facilitates rapid model expansion.
• Being the first established cab aggregator in India, the company enjoys widespread brand recognition and customer trust. This existing user base translates to a captive audience for its EV offerings, reducing marketing costs and potentially creating a smoother transition from cabs to cars.
• Acquiring TaxiForSure expanded Ola's reach and solidified its dominance in the cab aggregation market. This broader customer base translates to a larger potential pool of EV buyers, further strengthening their market position.
• Ola's direct-to-customer omnichannel distribution model eliminates reliance on dealerships and their associated costs. This translates to potentially lower prices for consumers and stronger brand control throughout the purchase journey.

#5 Risk Factors

• Ola's revenue predominantly comes from a limited range of electric scooters, primarily one or two dominant models. This lack of diversification makes the company susceptible to fluctuations in demand for these specific models or competition within this niche.
• Additionally, Ola's dependence on imported resources like lithium for battery production makes Ola vulnerable to global supply chain disruptions and price fluctuations. Any significant disruption could affect production and sales.
• Ola's heavy dependence on government subsidies significantly contributes to its affordability. Any reduction or elimination of these subsidies could raise the purchase price, potentially dampening demand.
• The Indian EV market is witnessing rapid growth, attracting established players like Hero Electric and Bajaj Auto, as well as global giants like Tesla and Ather Energy. This intense competition creates a challenging landscape for Ola to maintain its market share.
• Any incidents related to safety concerns or technical issues with Ola's scooters could damage the company's brand image and consumer confidence, leading to lost sales and reputational damage. Ola Electric hit headlines last year after a video of the company's electric scooter got viral in which a 2-wheeler caught fire and soon questions were raised over the safety standards on social media.

To Conclude

The company recently announced new EV scooter models, the Ola S1 X (2 kWh), Ola S1 X (3 kWh) and Ola S1 X+. It started delivering Ola S1 X+ in December 2023.

It plans to commence delivery of the Ola S1 X (2 kWh) and the Ola S1 X (3 kWh) by the first half of 2025.

It is also working towards delivering the recently announced line-up of four motorcycle models: Diamondhead, Adventure, Roadster, and Cruiser in 2026.

Additionally, India is at the forefront of electrification of mobility due to the favourable total cost of ownership compared to internal combustion engine vehicles.

India is the second largest two-wheeler market globally (by domestic sales volume), and electric two-wheelers (E2Ws) are projected to account for 41-56% of the domestic 2W sales volumes by 2028.

This is further set to boost company's performance.

Nonetheless, it's important to acknowledge that like any investment opportunity, Ola Electric presents its own unique set of advantages and disadvantages that potential investors should consider.

The Indian semiconductor industry stands at the cusp of transformation, poised for significant growth and influence on the global stage.

For more, check out our editorial India's Semiconductor Dream: Is It Becoming a Reality?

And for more information on IPOs, check out the list of upcoming IPO's.

Until next time...

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