Ola Electric IPO: E2W maker raises Rs 2,763 cr from anchor investors

Investors include SBI MF, Templeton, Amundi, Goldman Sachs

Ola Electric, India’s largest electric two-wheeler (e2W) maker, on Thursday allotted 364 million shares to anchor investors to mop up Rs 2,763 crore. The allotment was made at Rs 76 apiece — the top-end of its price band.

Ola’s Rs 6,146 crore IPO, the biggest since the Rs 21,000 crore IPO of the state-owned LIC in May 2022, opens for subscription on Friday and closes on Tuesday. The anchor allotment was made to over 80 domestic as well as foreign funds.

About Rs 1,117 crore was allotted to domestic mutual funds (MF) that included SBI MF, HDFC MF, Nippon MF and UTI MF. Among the foreign funds to get allotment were Templeton Global, Nomura, Amundi, Jupiter Global and Goldman Sachs.

Investment bankers said the demand in the anchor book exceeded the shares on offer. Anchor allotment — made a day before an IPO opens —provides cues for other potential IPO investors. About 60 per cent of the shares reserved for institutional investors in the IPO can be allotted under the anchor book.

The Softbank-backed Ola has set the price band of Rs 72-76 per share for its maiden share sale. At the top end of the price band, Ola will be valued at Rs 33,522 crore ($4 billion) on a post-diluted basis. Through the IPO, the Bengaluru-based firm is looking to issue fresh shares worth Rs 5,500 crore which will be utilised to repay debt, expand its gigafactory, and for research and development.

The offer for sale (OFS) portion of the issue is only Rs 646 crore, of which founder Bhavish Aggarwal’s share is Rs 288 crore. About nine other investors are selling stakes, including Tiger Global (Rs 48 crore) and Softbank (Rs 181 crore). Alpine Opportunity and Tekne Private are offloading small quantities at a loss as their acquisition cost is over Rs 111 per share. Following the IPO, the promoter shareholding in the company will decline from nearly 45 per cent to 36.78 per cent.

Ola reported a net loss in FY24 and was even loss-making at the operating profit level. The company has been burning cash but has managed to improve its free cash flows loss margin to -31 per cent in FY24. Due to the cash burn, Ola has moved from net cash positive in FY22 to net debt in FY24.

However, if the future of the 2W industry is to be electric, Ola has a head start over the competition. With close to 3.3 lakh deliveries in FY24, the company had a market share of 35 per cent.

According to Redseer, e2W penetration in India is expected to expand from approximately 5.4 per cent of domestic 2W registrations in FY24 to 41-56 per cent of domestic 2W sales volume by FY28. The Indian e2W industry is expected to grow at a CAGR of 11 per cent to reach from a size of $35 billion (Rs 2.8 trillion) to $45 billion (Rs 3.6 trillion) in FY28.