Ola Electric Mobility rises 20% on debut on electric vehicle optimism

Firm's valuation at Rs 40K cr despite tepid response to IPO

Ola Electric Mobility shares jumped 20 per cent on their trading debut to hit the upper circuit on Friday, valuing the country’s largest electric two-wheeler (e2W) at Rs 40,218 crore, despite a lukewarm response to its Rs 6,146 crore maiden share sale.

The Bhavish Aggarwal-led firm’s shares ended at Rs 91.2, up Rs 15.2, or 20 per cent, over its issue price of Rs 76, on the NSE, where Rs 4,426 crore worth of shares got traded. After opening at Rs 76, the stock hit its 20 per cent upper trading limit with only buyers and no-sellers at the counter.

The surge in the stock price of the SoftBank-backed company is an indication that investors are willing to bet on a sustained and long-term shift from petrol 2W to e2W in India, the world’s largest market.

Ola IPO, the largest in over two years, had garnered just 4.3 times subscription with some investors staying away from the yet-to-turn-profitable e2W maker, amid a selloff in the market this week triggered by US recession fears.

Following the listing of Ola, Aggarwal, who is just 38, has seen its net worth go past $1.5 billion, cementing his place in the world’s youngest billionaires list. With sales of about Rs 5,000 crore in FY24, Ola is currently valued at 8 times its sales. Listed peers TVS Motors, Eicher Motors, Bajaj Auto, and Hero MotoCorp — predominantly operating in the petrol 2W space — currently trade in the range between 3x and 8x sales, say analysts.

Ola, the largest e2W seller in India by number of units, accounted for 35 per cent of the total e2W registrations in FY24. It is seen as having a head start over its competition if the market shifts towards electric vehicles, labelled as the future of mobility.

According to Redseer, e2W penetration in India is expected to expand from 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 a size of $35 billion (Rs 2.8 trillion) to $45 billion (Rs 3.6 trillion) in FY28, the consultancy firm predicts.

Within nine months of delivering its first EV scooter in December 2021, the company became the best-selling e2W brand in India in terms of monthly e2W registrations, according to the VAHAN portal of the Ministry of Road Transport and Highways.

“We believe that Ola has significant headroom to grow in coming years led by favourable market conditions, regulatory norms, and the higher capacity utilisation of Ola Future factory on a yearly basis. Moreover, they commenced manufacturing the 4,680-form factor cells at the Ola Gigafactory in March 2024 which is expected to allow better control over battery and EV quality, supply, and costs,” said Anand Rathi in a note.

Ola raised Rs 5,500 crore in fresh capital through the IPO. The company plans to use the proceeds to expand the capacity of its cell manufacturing plant from 5GWh to 6.4GWh. It will also use the proceeds to repay debt and research and product development. Ola Electric manufactures two and three EVs along with EV components like battery packs, motors and vehicle frames. Ola currently has a factory in Bengaluru, and it is in the process of building its EV hubs in the Krishnagiri and Dharmapuri districts in Tamil Nadu.