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Ola Electric, India's first auto IPO in 20 years raises stakes

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Ola Electric's IPO is set to create history by becoming the first auto sector company to go public in 20 years. The Indian automotive industry is set to witness a significant event with the initial public offering (IPO) of Ola Electric, a leading electric vehicle (EV) maker.

Ola Electric has filed its Draft Red Herring Prospectus (DRHP) with the Securities Exchange Board of India (SEBI) for an initial public offering (IPO) on December 22, 2023. The company, founded by Bhavish Aggarwal, is looking to raise funds through the IPO for its business expansion and product development.

Funds Target

Ola Electric's IPO has proposed to raise a Rs 5,500 crore issue of fresh equity share and an Offer For Sale of 95,191,195 promoters and existing investors. The promoter, Bhavish Aggarwal, holds a 36.94% stake in the company, while Indus Trust owns 3.85%, Softbank Group holds 21.98%, Tiger holds 6.03%, and Matrix Partners owns 3.51% In addition to its IPO, Ola Electric is considering a re-IPO placement of shares worth Rs 1,100 crore. If successful, it would reduce the size of the fresh issue accordingly.

Utilization of the funds

Ola Electric intends to utilize the funds raised from its IPO for various purposes, with a focus on research and development (R&D). The company plans to allocate around Rs 1,226 crore for capital expenditure, Rs 800 crore for debt repayment, and Rs 1,600 crore for R&D. Additionally, Ola Electric has set aside Rs 350 crore for inorganic growth.

Financial metrics of the company

The company reported revenue from operations at Rs 1,242.74 crore for the June-ended quarter, with a net loss of Rs 267.15 crore.

Book managers

The book managers for the IPO are Kotak Mahindra Capital, Citigroup Global Markets India, BofA Securities India, Goldman Sachs (India) Securities, Axis Capital, ICICI Securities, SBI Capital Markets, and BOB Capital Markets. Link Intime India is the registrar of the offer.

Legal cases

As of December 2023, Ola Electric faces 189 pending legal proceedings before various consumer dispute redressal commissions, with a total claim of Rs 4 crore. Additionally, the Enforcement Directorate has issued a summons to Ola Electric's promoter, Bhavish Aggarwal, under section 50 of the Prevention of Money Laundering Act, 2002, related to a complaint filed by Lahari Recording Company regarding copyright infringement for playing music on 'Ola Play' devices without a valid license (as per DRHP) However, the matter has been settled under a settlement agreement dated August 20, 2022

Sales

In November 2023, Ola Electric achieved its highest-ever sales, selling 30,000 units and capturing a 35% market share. Since its launch in December 2021, the company has sold over 3,00,000 electric vehicles, generating impressive revenue figures. In December 2023 alone, Ola sold 9,841 e-scooters, contributing to a total of over 1,80,000 vehicles sold in the first half of the fiscal year 2024. This remarkable performance has propelled Ola Electric to the top of the E2W sales charts in India, making it a rapidly growing electric vehicle sector.

Losses

Ola Electric is pretty new. It foresees potential short-term losses but prioritizes growth. ₹1,600 crore has been estimated for Research and Development with an aim for expansion and diversification.

Few key elements

In 2021, Ola Electric was valued at approximately ₹23,760 crore. The company has raised around ₹3,375 crore from investors such as Falcon Edge and SoftBank Group Corp.

Ola Electric is investing ₹3,750 crores to establish a facility in Bengaluru for the production of cells and battery packs for electric vehicles.

The company is expanding its cell manufacturing gigafactory, utilizing part of the funds raised from its IPO. This strategic move aims to strengthen Ola Electric's position in the EV market and enhance its ability to meet the growing demand for electric vehicles in India.

India accounts for 15-20% of global production for two-wheelers (2W) in terms of sales volumes, with strong growth headroom in both segments.

‘As Ola plugs into public funding, can it electrify the market?’

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