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Ola Electric's Capex Needs May Explain An Expedited IPO Plan

The company has sold over 2.72 lakh scooters since the start of operations.

<div class="paragraphs"><p>Ola Electric scooters. (Source: Company website)</p></div>
Ola Electric scooters. (Source: Company website)

Ola Electric Mobility Pvt.'s big-ticket spending requirements to scale up its various businesses and investors’ hunt for greener ventures make it the right time to go public, despite being operational for just less than two years.

“The timing is perfect for an IPO, as investors are looking for opportunities to bet on greener and more sustainable businesses, while the company itself may be under pressure because of too many unknowns and its high capex requirements going forward,” said Puneet Gupta, director at S&P Global.

The electric vehicle maker that started selling electric scooters at the end of 2021 quickly became the top seller in the segment. Its wide-ranging products and plans to move into premium motorcycles also reflect its larger ambitions in the space compared with any of its new-age or established peers.

The company has sold over 2.72 lakh scooters since the start of its operations and claims over 40% market share in the electric scooter segment. The scooter sales of 1.06 lakh units in the first five months of April–August in the ongoing fiscal are closing in on the overall FY23 sales of 1.53 lakh units, data from the Federation of Automobile Dealers Associations showed.

Scaling Up

Ola plans to double its manufacturing capacity to two million units in the next six to nine months, which can be expanded up to 10 million units per year.

It will also start manufacturing lithium-ion cells locally from early next year with an initial capacity of 5 GWh, planned to be expanded in phases to 100 GWh.

Then there’s the plan to launch a premium electric passenger vehicle in 2024, with four electric motorcycles also lined up for launch starting next year.

All this will require big money, and even though the company is backed by marquee investors such as Japan’s SoftBank Group Corp. and Singapore’s Temasek, the company’s listing on the exchanges will throw open various other avenues to get funding.

Ola Electric doesn’t generate profits as of now to fund its own operations.

In FY22, the company posted a revenue of Rs 373.4 crore, up from Rs 86 lakh in FY21, when it was a pre-revenue company.

The loss widened to Rs 784.1 crore from Rs 199.2 crore in FY21. The expenses jumped to Rs 1,240.4 crore in FY22 from Rs 305.4 crore in the year-ago period, the corporate filings showed.

“FY22 was an investment year for us; we started our sales only in January 2022, and FY23 has been a very strong revenue year for us, and the bottom line has improved significantly. This year we may not be able to share a forecast, but it will be positively surprising to see the numbers," Bhavish Aggarwal, co-founder and chief executive of Ola Electric, told reporters on Aug. 15.

Leapfrogging Peers

A battery manufacturing plant to power its vehicles, e-scooters across price points, and work going on for electric passenger vehicles and motorcycles reflects Ola Electric’s singular vision to lead in India’s automotive industry by betting on electric technology in the upcoming years.

The company may tap the equity market as early as October-end to raise nearly $700 million, Reuters reported last month.

Ola Electric has raised nearly $800 million in funding since 2019 and was last valued at $5.4 billion.

“The company will seek a higher valuation based on its tech-driven capabilities, not just as an EV maker,” Ambareesh Baliga, an independent market analyst, said. “However, the investors will also seek a timeline for the company’s path to profitability.”

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While the company has yet to file its financials for FY23, media reports have suggested the company’s operating loss widened due to higher revenue compared with last year.

However, the hype around EV businesses and investors on the lookout for promising green businesses may ensure a smooth sail for Ola Electric.

“Ola is ahead of the curve compared with both its start-ups and established peers. The vision and dedicated focus on electric vehicles will help them leapfrog and take a lead ahead of the competition in the coming years,” S&P’s Gupta said.

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