At $10 Billion Valuation, Ola Electric To Launch India's Largest Auto Sector IPO By Early 2024

Just a handful of days after it secured $300 million in fresh funding, India's largest electric vehicle company, Ola Electric, is said to be in talks with financial and legal institutions to go for its much-awaited IPO (initial public offering).

Ola Electric To Go For IPO

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Sources say it has already begun the process of preparing its draft prospectus for an IPO, which will be filed at the latest by September with market regulator SEBI for clearance. The IPO is likely to launch by early 2024, as per a Business Standard report. Some other news reports mention that the IPO may be launched by 2023.

According to sources, the company is in talks with Kotak, Goldman Sachs, Citibank, and others as banking partners for the IPO. It has hired law firms Cyril Amarchand Mangaldas and Shardul Amarchand Mangaldas as legal advisors.

Ola electric reportedly sold around 30,000 scooters in April, its highest so far, and is the market leader in the EV scooter space. If it sells 10% in the IPO - the minimum legally required to list - at that price, this could be India's biggest IPO this year amid tepid market conditions.

Just a few days ago, Ola Electric secured fresh funds which helped to increase its valuation from $5 billion in January 2022 to $6 billion now as part of its pre-IPO offering. If the clearances come in time, sources say the IPO could be slated for the first quarter of the calendar year 2024. As per ET report, Ola Electric plans up to $1billion IPO at $10billion valuation.

Currently, founder and promoter Bhavish Aggarwal reportedly has a 40% stake in Ola Electric which is expected to be diluted by 2 per cent after the fresh raising of funds from the sovereign fund.

Ola is banking on the fact that it is already the largest player in the electric two-wheeler space with a market share of 34 per cent in April and registrations of over 21,560 vehicles (actual sales will be higher) based on VAHAN data. Its closest competitor is TVS with 8,718 vehicles.

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What Ola Plans To Do With IPO Funds

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The recent fundraise and the expected IPO will be able to finance Ola electric¡¯s ambitious expansion. One goal is to increase its manufacturing capacity of electric two-wheelers from 0.5 million to 2 million in the next phase. This is necessary because it aims to reach sales of 1 million by the end of 2023 since its launch-nearly three times the 300,000 vehicles it has sold since its launch in the country 18 months ago.

In addition, work is in full swing to build its battery cell factory which will require $0.5 billion for powering batteries of up to 5 GWh in the first phase. The plan is to kickstart its operations by December end and source even its cells which are currently imported from its own unit, the report mentioned.

The company is eligible under the production linked incentive scheme for batteries of up to 20 GWh. Ola Electric intends to hike it up to 100 GWh and hit 10 million per annum eventually at the two-wheeler facility in its Gigafactory in Tamil Nadu.

Ola eletric is also expected to launch 5-6 models in the scooter segment in the coming months. It is also reported to be planning a foray into the motorcycle segment, with 3-4 models planned by the end of the year.

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This is expected to scale up Ola's business significantly with strong growth in revenue and market share, as per the report.

However, the big challenge for the electric two-wheeler market is the government¡¯s decision to cut the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India subsidy by a third-a signal that it might be withdrawn altogether from April next year. According to ICRA, the subsidy on an Ola scooter with a 3.97 kWh battery will fall by 62 per cent from Rs 59,000 to Rs 22,500. While most companies say they will have to pass on 10-20 per cent of the extra cost to consumers, this could still slow down the sales growth.

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