Ola Electric IPO - Investment Rationale, Issue Details, Financials, Strengths, Risks And More: Anand Rathi

Anand Rathi's IPO Report

Ola Electric Mobility Ltd. will launch its initial public offering tomorrow and the offer closes for subscription of Aug. 06. A pure EV player in India has set the price band in the range of Rs 72-76 per share. The minimum order lot for bidding is 195.

At the upper price band, the Rs 6,146 crore IPO comprises of fresh issue of 72.37 crore shares, worth Rs 5,500 crore and an offer-for-sale by existing shareholders of 8.49 crore shares, aggregating to Rs 645.56 crore.

Object of fresh issue

• Capital expenditure to be incurred by the subsidiary, OCT for the Project.

• Repayment or pre-payment, in full or part, of the indebtedness incurred by the Subsidiary, OET.

• Investment into research and product development.

• Expenditure to be incurred for organic growth initiatives

• General corporate purposes.

Valuation and outlook

Ola Electric Mobility being the fast-growing segment in EV space. Going ahead, EVs are anticipated to drive substantial growth in the global automotive market. However, we believe that Ola has significant headroom to grow in coming years led by favourable market conditions, regulatory norms and the higher capacity utilization of Ola Futurefactory on yearly basis.

Moreover, they commenced manufacturing the 4680-form factor cells at the Ola Gigafactory on March-24 which is expected allow better control over battery and EV quality, supply, and costs.

Despite being a lossmaking entity company has gained market share of 34.8% in E2W segment.

At the upper price band company is valuing at marketcap/sales of 6.6 times with a market cap of Rs 335,22 crore post issue of equity shares. Currently top global automobile entities are trading between 1-8 times as on marketcap/sales.

Therefore, on the valuation front, we believe that the company is richly priced. Thus, we recommend a “Subscribe – long term” rating to the IPO with a higher risk appetite.

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