Ola Electric board approves ₹1,000 crore fundraise via rights issue

Ola Electric’s board has approved a rights issue of partly paid-up equity shares to raise up to ₹1,000 crore, the electric two-wheeler maker said in a regulatory filing Monday.

 

The move comes weeks after the company approved plans to mobilise up to ₹1,500 crore. The rights issue will be offered to eligible equity shareholders of the company as on the record date, which will be determined and notified subsequently, the filing said. The rights issue is subject to regulatory and statutory approvals, as may be required under applicable law.

 

The move would allow all eligible shareholders, including retail and institutional investors as well as the promoter group, to participate in the exercise, according to people familiar with Ola’s strategy.

 

“Some portion of the money would go into debt repayment,” said a source.

 

Industry sources said the proposed capital raise could put Ola Electric on the path towards a breakeven point in cash without requiring another fundraise in the near term.

 

Ola Electric’s promoter group, led by Chairman and Managing Director Bhavish Aggarwal, holds about 33 per cent in the company. Aggarwal is expected to participate in the proposed rights issue and invest a proportionate amount, the person cited earlier said.

 

The company’s board was scheduled to meet on Monday. However, there was no update till the time of going to press. The board was supposed to consider the proposal, which would be subject to applicable regulatory and statutory approvals.

 

The company’s auto business is nearing a breakeven point in cash, but its cell manufacturing is still at an early stage and will require capital to scale up, according to sources.

 

Ola had said in February that restructuring its operations had lowered the automotive business’ adjusted operating Ebitda (earnings before interest, tax, depreciation and amortisation) breakeven to around 15,000 vehicles a month.

 

“Most of the funds are expected to be invested in battery and cell technology. I don’t expect much opposition from the board to founder Bhavish Aggarwal's plans for the business,” said another person familiar with Ola Electric’s strategy.

 

Ola Electric has largely completed the expansion of its automotive operations and is expected to shift towards a dealer-led retail model, reducing the need for significant capital expenditure on expanding its store network, according to sources.

 

The company opened its first dealer-partner outlets earlier this month and is targeting more than 500 such units over the next couple of quarters, while its existing company-owned stores transition into product experience centres.

 

The proposed fundraise is expected to provide the company “defence capital” for the next few years, while also supporting the scaling up of its cell business and providing liquidity, the person said.

 

“This could be one of the last fundraises before the company becomes profitable,” the person said.

 

Ola Electric’s monthly sales volumes, which had declined, have started recovering and are now 13,000-15,000 units, according to the person. The company is targeting about 20,000 over the next few quarters, he added.

 

Ola Electric had previously received approval to raise up to ₹1,500 crore. Its board had cleared the enabling proposal in October last year to raise the amount through equity shares or other permitted securities. The company this year rang up ₹780 crore through a qualified institutional placement.

 

The company’s latest financials underline the challenge.

 

Revenues from operations fell 45 per cent year-on-year to ₹455 crore in the June quarter, although its consolidated net loss narrowed to ₹336 crore from ₹428 crore a year earlier.

 

The adjusted operating Ebitda loss decreased to ₹195 crore from ₹326 crore in the preceding quarter because operating expenses declined.

 

Ola also reported a negative operating cash flow of ₹215 crore for the June quarter. Its financial disclosures said proceeds from the qualified institutional placement were expected to support capital expenditure, loan repayments and working-capital requirements.

 

The retail data from the Federation of Automobile Dealers Associations shows Ola registered 14,106 units in July and 13,852 in August, in line with the 13,000-15,000 units a month cited by the person. 

 

The 20,000-unit target is about 44 per cent above the level of August and above the year’s best month so far, June, when Ola Electric registered 16,249 units.

 

Registrations fell to 3,968 units in February, then climbed to 10,118 in March, 12,331 in April and 15,141 in May before peaking in June. Volumes have eased in both months since. In the eight months to August, Ola registered about 93,000 units.

 

Retail sales of electric two-wheelers in August were 183,204 units, up 67 per cent from a year earlier.

 

Ola Electric’s registrations were down 28.8 percent over the same period, the only decline among the major players. 

 

TVS Motor led the market with 48,938 units. It was followed by Bajaj Auto with 41,114, Ather Energy at 28,757 and Hero MotoCorp at 19,007.

 

Ola Electric came in fifth at 13,852 units, giving it about 7.6 per cent of the segment.

 

The year-on-year decline has narrowed considerably from the beginning of the year, when Ola Electric’s registrations were down about 69 per cent in January, although the decline widened again to around 29 per cent in August after easing to about 20 per cent in May and June.