Ola Electric IPO: 10 key points to know from India's 1st EV startup RHP

Ola Electric IPO: The much-awaited initial public offering (IPO) of Ola Electric Mobility Limited opens for subscription on Friday, August 2, 2024. The company  is a major player in India's electric vehicle (EV) market, focusing on building vertically integrated technology and manufacturing capabilities for EVs and EV components, including cells. Ola Electric commands nearly a 35 per cent market share in India's electric two-wheeler market in FY24 and is the first EV startup company to roll out an IPO in India.

"As India focuses on reducing its carbon footprint and enhancing energy security, Ola Electric's IPO could be a pivotal development in the green mobility space. This IPO includes a fresh issue of shares worth Rs 5,500 crore. With a 35 per cent market share in India's electric two-wheeler market in FY24, up from 21 percent in FY23, Ola Electric sold 3.29 lakh units in FY24, more than doubling its sales from the previous year. The IPO not only showcases Ola Electric's growth and market leadership but also highlights the potential of the EV sector," said the brokerage firm Master Capital.

As investors await the subscription window to open, here are the 10 key points taken from the Red Herring Prospectus (RHP) of SoftBank-backed Ola Electric IPO:

1. Ola Electric IPO details

The IPO comprises a fresh issue of 808,626,207 shares aggregating up to Rs 6,145.56 crore and an offer for sale of 84,941,997 shares worth Rs 645.56 crore. Bhavish Aggarwal, one of the promoters of the company, is offloading 37,915,211 equity shares with a face value of Rs 10 each, as per the RHP papers. Indus Trust, another promoter, is offloading 4,178,996 equity shares of face value Rs 10 each. The IPO will be available at a price band of Rs 72-76 per share and a lot size of 195 shares.

2. Ola Electric IPO key dates

 
The three-day subscription window for Ola Electric will close on Tuesday, August 6, 2024. The basis of allotment is scheduled for Wednesday, August 7, 2024, and Ola Electric's shares will be credited into demat accounts on Thursday, August 8, 2024. Shares of Ola Electric are scheduled to list on the exchanges - BSE and NSE - on Friday, August 9, 2024.

3. Ola Electric IPO registrar details

 
As per the RHP paper, Link Intime India Private Ltd is the registrar for Ola Electric's IPO, while the book-running lead managers include Bofa Securities India, Goldman Sachs (India) Securities Private, Kotak Mahindra Capital Company, Axis Capital, SBI Capital Markets, Citigroup Global Markets India, Bob Capital Markets, and ICICI Securities.

4. Ola Electric IPO objective

 
From the net proceeds from the IPO, Ola Electric proposes to utilise Rs 12,27.64 crore for capital expenditure to be incurred by its subsidiary, Ola Cell Technologies (OCT), for the project, as per the RHP paper. Nearly Rs 8,00 crore will be used for the repayment or pre-payment, in full or part, of the indebtedness incurred by its subsidiary, Ola Electric Technologies (OET). From the proceeds  Rs 16,00 crore will be invested in research and product development.

In addition to that, the company will use nearly Rs 3,50 crore for expenditure on organic growth initiatives, with the remaining proceeds for general corporate purposes.

5. Ola Electric business model

 
According to the RHP papers, the company's business model is founded on three key scalable platforms: (1) an R&D and technology platform with in-house design and development across EV technologies and components, (2) an adaptable manufacturing and supply chain platform, and (3) a D2C omnichannel distribution platform. The company's model is vertically integrated across R&D and technology, manufacturing, supply chain, sales and service, and charging facilities.

6. Indian EV market and Ola Electric

India is emerging as a manufacturing powerhouse of EVs. It is the second-largest two-wheeler market globally and the third-largest in the four-wheeler market in terms of domestic sales. The total addressable market for two-wheeler exports from India is between Rs 7.20 trillion and Rs 8.00 trillion, as per the data cited in the RHP paper. E2W adoption has grown rapidly to reach approximately 5.4 percent of total two-wheeler registrations in India in Fiscal 2024. E2Ws are projected to account for 41-56 percent of the domestic two-wheeler sales volume by Fiscal 2028. Additionally, markets like Africa, LATAM, and SE Asia provide an export opportunity for Indian E2W OEMs, further increasing their TAM, it said.

 "We believe that we are well-positioned to address this large market opportunity in EVs led by our vertically integrated approach, focus on technology, R&D, execution ability, and eligibility to avail certain government incentives. Globally, disruptor OEMs (versus incumbent OEMs) have emerged as market leaders in EVs driven by a focus on innovation. Similarly, in India, disruptor OEMs have scaled well to cover 67 percent of the E2W domestic sales by volume in Fiscal 2024," Ola Electric said in the RHP papers.

7. Ola Electric financial details
 

 As per the RHP paper, Ola Electric's revenue from operations during the fiscal year 2023-24 jumped to Rs 5009.83 crore, nearly double the Rs 2690.92 crore reported in FY23. The company's EBITDA declined to Rs 1040.19 crore in FY24 from Rs 1197.09 crore reported in FY23. Meanwhile, the company's loss widened to Rs 15,84.44 crore in FY24 from Rs 14,72.07 crore reported in FY23.

8.  Ola Electric subsidiaries
 

 Here is the list of subsidiaries of Ola Electric Mobility Limited, as disclosed by the company in the RHP Papers:

•    Ola Electric Technologies Private Limited - Subsidiary
•    Ola Electric Charging Private Limited - Subsidiary
•    Ola Cell Technologies Private Limited - Subsidiary
•    Ola Electric Mobility Inc. USA - Subsidiary
•    Ola Electric Mobility B.V., Netherlands - Subsidiary
•    Etergo B.V, Netherlands - Step-down subsidiary
•    Ola Electric UK Private Limited - Step-down subsidiary
•    Ola Electric Technologies B.V, Netherlands - Step-down subsidiary
•    Etergo Operations B.V., Netherlands - Step-down subsidiary
•    EIA Trading (Shanghai) Co. Ltd. (China) - Step-down subsidiary

9. Eligibility for the PLI schemes

   

The Government of India launched Production-linked Incentive (PLI) Schemes in 2020 to boost domestic manufacturing, cut down import bills, encourage exports, and generate employment. Ola Electric has disclosed in the RHP papers that the company has been approved for India’s PLI schemes – one relating to the manufacturing of advanced automotive technology products (the Automobile PLI Scheme) and another relating to advanced cell chemistry batteries (the Cell PLI Scheme). According to the Redseer Report, Ola Electric is the only EV manufacturer in India that is a beneficiary of two PLI schemes.

10. Risks and threats
 

The automotive market in India, in which Ola Electric operates, may encounter several threats that could impede their growth trajectory and stability. The company, in the RHP papers, outlines that economic downturns, recessions, and heightened inflationary pressures can diminish consumer purchasing power, leading to lower sales volumes and profitability, with consumers deprioritizing non-essential purchases. Additionally, geopolitical tensions pose substantial risks to supply chain continuity and cost structures, potentially leading to inventory shortages and increased costs.

The company highlights that potential shifts in government policies, including changes in taxation, subsidies, foreign direct investment regulations, EV battery disposal, and labor laws, could introduce regulatory challenges. Intensified competition, fueled by substantial investments and technological advancements, presents another risk factor. "With the presence of multiple business models within the automotive market, competitors may gain competitive advantages, potentially undermining the market position of Ola Electric Mobility Limited and/or others," said Ola Electric in RHP papers.