Ola Electric IPO: CMD Bhavish Aggarwal’s rendezvous with analysts ahead of the public issue; here are key takeaways

Ola Electric IPO: The initial public offering of Ola Electric Ltd is the next big awaited issue that the D-Street looks forward to. The Securities and Exchange Board of India (SEBI), the capital market regulator, gave the Bengaluru-based Indian electric two-wheeler maker its approval for the IPO in June.

In order to raise up to ₹5,500 crore through a fresh equity offering, Ola Electric has submitted a draft red herring prospectus (DRHP) to SEBI in December. In addition, it has suggested selling 95.12 million equity shares at a face value of ₹10 through an offer for sale (OFS). The majority of the shares, or 47.3 million, or half of the total shares offered for sale, will be sold by founder and CEO Aggarwal.

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Domestic brokerage, Nuvama Institutional Equities, met with Ola CMD Bhavish Aggarwal prior to the IPO and the company's release of the pricing band details and key dates. The brokerage toured the company's E-2W/cell production facility, following which the brokerage house shared some key takeaways.

Electric vehicle (EV) adoption in 2Ws is anticipated to soar over the medium term due to its better cost economics and greater model possibilities, the brokerage said after their conversation with the management.

Second, Ola has scheduled motorcycle releases for FY26 and beyond in the Adventure, Diamond Head, Roadster, and Cruiser categories. The management said that the third generation platform will be introduced the following year, which should result in a 15% cost reduction. Additionally, a 20 GWh cell manufacturing capacity is envisaged for both internal use and export to the automotive and industrial sectors.

Nuvama's visit note emphasized Ola Electric as a pioneer in the E-2W space and a target for cell production. Let's take a look at both.

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Ola Electric – Leader in E-2W space

With a market share of almost 50% in Q1FY25, Ola is the market leader in India for E-2W, according to the brokerage. It can assemble up to 1 million vehicles, although its current capacity is just 1 million. It can combine motors, batteries, and electronics—all EV component parts—vertically. The business uses an omni-channel direct-to-customer distribution network made up of more than 400 service centres and 900 experience centres.

“The speed at which Ola has set up its manufacturing facility (eight months) is commendable. It has developed new products (since Aug-21, launched five products, and unveiled four motorcycle variants. We expect EV penetration to continue and grow from 5% in FY24 to 20% in FY30, implying a 30% CAGR,” said Nuvama in its report.

Targeting cell manufacturing opportunity

Ola has established a 1.4GWh manufacturing capacity for 4680 cells (NMC chemistry), according to the brokerage. The 21x70mm cell will probably be replaced by the 4680 cell, a 46x80mm cylindrical cell. Homologation of the 4680 cells is being done for current models. By the end of FY25, these cells most likely will be modified for use in current models.

According to management, the commercial economics of cell production are appealing: i) Peak income for 1GW is estimated to be USD 100 million, with an investment cost of USD 70–80 million. ii) A 25–30% EBITDA margin (at optimal utilisation).

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