Things got here to a head on 17 August when a crowd of fifty irate prospects, annoyed by delays, tried to power open the doorways of the service centre whereas the mechanics cowered inside. Most of the scooters had are available for brake pad replacements. There is a scarcity and Ola shouldn’t be capable of sustain, resulting in prospects having to attend for over a month.
This wasn’t a sporadic incident—Ola has a historical past of run-ins with prospects. Despite all these damaging incidents, nevertheless, nothing appears to have an effect on its prospects. Within six months of its debut, it turned India’s largest electrical two-wheeler maker in 2022, a place it has solely consolidated within the final two years.
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A bumper preliminary public providing (IPO) earlier this month, which was oversubscribed 4.27 instances, has solely added to Ola’s credentials. As the primary pureplay EV (electrical car)-maker to be listed in India, it raked in ₹6,146 crore, additional elevating the profile of its flamboyant if controversial founder and chief govt officer (CEO), Bhavish Aggarwal. Investors—angel, enterprise, institutional and now retail—have flocked to him and largely stayed put throughout his entrepreneurial journey—first with Ola Cabs, then with Ola Electric, and extra just lately, with AI agency Krutrim.
“We have been privileged to be companions with Bhavish since Ola Consumer and proceed to be companions now in Krutrim as effectively,” said Avnish Bajaj, founder and managing director of venture capital firm Matrix Partners. “Market or perception ups and downs externally do not affect real and deep relationships. Ola Electric has deep moats and cost advantages via its full-stack business model, including BharatCell (Ola’s indigenous lithium-ion cell, which received approval in May) due to be launched soon,” he added.
There are detractors, too, a lot of them direct rivals. The most vocal of them is Rajiv Bajaj, managing director of Bajaj Auto, who has repeatedly questioned Ola’s enterprise mannequin.
Bajaj shouldn’t be solely satisfied EVs are that large a phenomenon. “We don’t suppose there’s any celebration occurring within the first place so far as electrification is worried. Some individuals could also be messing round in a single nook of the room; that does not make it a celebration,” Bajaj mentioned on 4 July in a thinly veiled dig at Ola.
“In spite of the federal government pouring a lot cash into EVs and subsidies, on the finish of the day, the electrical car penetration within the two-wheeler section is about 4-5%. It would not actually appear that it has taken off like a rocket,” he added.
What has taken off although, is Ola’s stock.
Riding the Market
Between its not-so-happy prospects and ever gung-ho traders stands the newly pony-tailed, kurta-clad Aggarwal, who will be simply 39 this Wednesday.At Ola’s annual occasion, ‘Sankalp’, on 15 August, the Ola founder displayed a slide that has handed into meme folklore.
Titled “4th Largest EV Company by Revenue”, it showed Tesla in the top spot, followed by Rivian, VinFast Auto and Ola Electric. At the bottom of the slide, in a font size that would have embarrassed a used-car salesman, were two seemingly innocuous words: “Excluding China”.
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“Well, then even I topped my engineering batch—if you happen to exclude the highest 35 college students,” quipped the Mumbai-based director of a wealth administration agency, who spoke toMint on situation of anonymity.
While sarcasm would possibly set off a one-time dopamine hit, the market clearly can’t get sufficient of Ola Electric. What else explains the stock’s dizzying rally?
After a muted opening on the BSE on the higher worth band of ₹76 per share, the stock rallied to hit the higher circuit on 4 of the primary seven buying and selling days. On 20 August, it hit an intraday high of ₹157.53—greater than double its itemizing worth.
That has led individuals to marvel if Ola is for actual—if the itemizing went towards conventional monetary knowledge. Ola is straddled with ₹2,800 crore debt, continues to burn money and is but to make a revenue. And but, its stock market efficiency post-listing defies logic.
Following a block deal of 23 million shares equal to 0.5% fairness on the identical day (20 August), the stock cooled off. By the top of the week, on 23 August, the stock had fallen additional to ₹126.21 per share, shedding practically 20% of the all-time high of 20 August. But with a market capitalization of over $6.7 billion, it’s nonetheless close to the valuation it was initially eyeing final yr.
“People must keep in mind that Ola has a free float of solely 17%. The remaining 83% excellent shares are locked in. In such low free-float corporations, preliminary momentum can take the stock to dizzying heights regardless of the absence of fundamentals,” the wealth management firm’s director added. “In fact, I would say Ola is a pure momentum play now. The market is paying for narrative. Once the market starts paying for execution, then such companies and their investors will get a reality check.”
New-age corporations itemizing on the bourses have very vocal camps of believers in addition to naysayers. An organization like Ola, helmed by a bellicose, in-your-face founder, is much more polarizing. But many members are keen to look past the short-term optics and deal with the bigger EV story.
“It’s a very good begin for the EV ecosystem, in each private and non-private markets. Private markets appeared overvalued versus the general public itemizing demand,” said Pramod Amthe, head of institutional equity research, Incred Capital, a brokerage firm. “With the Ola stock nearly doubling from listing to $7 billion market cap, it indicates public markets are equally excited about the EV opportunity.”
The subsequent hurdle
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With the itemizing, the stress for Ola to show worthwhile will go up and analysts consider this will govern its stock costs and valuation. While the corporate has laid to relaxation doubts about its capability to scale, elevate capital or lead the market by way of gross sales, Aggarwal nonetheless has to point out that Ola can flip a revenue. It’s one thing he was pressed on in the course of the firm’s first, practically hourlong analyst name on 14 August.
“Long-term, EVs will have [a] very related profitability quantity as ICE automobiles. ICE automobiles are solely getting costlier because of compliances and EVs are solely getting cheaper as a result of battery price curves,” Aggarwal said at the concall. “At what point that inflection happens, I’m sure all you analysts have your own models. I have my own. Not long but in the next few years we will all be there,” he added.
Compared to established friends resembling Hero MotoCorp, Bajaj, TVS and Royal Enfield, Ola’s earnings assertion doesn’t presently make for a very good learn. Its revenues are a sixth of the highest three listed corporations within the two-wheeler business. And whereas the others are worthwhile, with double-digit working margins, Ola continues to be within the pink.
In its first quarter (Q1) FY25 outcomes, Ola claimed it’s close to break even within the automotive enterprise section, which accounts for 99.7% of its income. Lithium-ion cells generate the remainder of the pie. But in absolute phrases, losses widened to ₹367 crore from ₹267 crore in Q1 FY24 although they did contract from ₹416 crore in This autumn FY24.
The phaseout of the FAME scheme in March additionally had an impression on the corporate—within the final 4 months, gross sales have been under the height of March 2024 (see desk). Subsidies have come down from a most of ₹60,000 to ₹10,000 per car between June 2023 and April 2024.
“The IPO provides Ola a headstart over others to maintain via some extra bleeding. It will additionally stay up for a ‘meltdown’ and consolidation within the electrical two-wheeler business as quickly as attainable to permit it to grow to be worthwhile,” mentioned Avik Chattopadhyay, founding father of Expereal, a model technique and options consultancy agency.
Ola’s broad path to profitability rests on two pillars—its creation within the bike lane and indigenous lithium-ion cell manufacturing.
The bike gambit
On 15 August, the corporate showcased three bikes primarily based on its S1 scooter sequence platform. The entry-level mannequin, Roadster X, has a 2.5Kwh battery pack and 200km vary. It will hit the market first, in January 2025, with a price ticket of ₹74,999. Two mid-range and top-of-the-line fashions will observe subsequently.
While various corporations, together with Hero MotoCorp, Bajaj, TVS and Ather, have ventured into the electrical scooter section, electrical bikes are nonetheless virgin territory and Ola is looking for to achieve an early-mover benefit right here.
At the outset itself, the Roadster X turns into probably the most reasonably priced electrical bike within the nation—the closest rival on worth level is Atum Vader S,at ₹108,500. The most cost-effective petrol bike, Hero MotoCorp’s HF 100, is priced at ₹59,018 (ex-showroom Delhi).
“The subsequent large frontier for EV penetration and EV development in India goes to be motorbikes. Motorbikes account for about two-thirds of the Indian two-wheeler market. So, it’s a vital step that this firm is endeavor,” mentioned Aggarwal on the firm’s first investor concall, after saying the Q1 FY25 outcomes on 14 August.
“Industry analysis signifies that the electrical bike market is predicted to develop at a CAGR of 11% to 13%. Although there are already established gamers on this section, Ola holds a robust benefit with its well-known model, in depth gross sales and distribution community, deep enterprise understanding and technological experience,” mentioned Saurav Kumar, managing director, Protiviti Member Firm for India, a enterprise consultancy.
Battery cost
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Lithium-ion cells, which account for as a lot as a 3rd of the price of an electrical car, are Ola’s different large play. The firm has arrange India’s first gigafactory and the majority of the capital raised from the IPO will be used to increase capability from the present 1.4 gigawatt hours (GWh) to 5GWh, and 6GWh within the subsequent section. There are plans to ramp it up additional, to no less than 20GWh by 2026, and 100GWh by 2030.
Alongside, the corporate has developed the 4680 cell, which it claims packs 5 instances extra power, 10% longer vary and 1.5 instances sooner charging than the present cell sourced from LG Chem that presently powers its scooters. These will be regularly seeded into its merchandise from the primary quarter of FY26.
Some business watchers are constructive concerning the firm’s battery plans. If the enterprise works out as deliberate, it will probably allow Ola to make batteries no less than on the similar worth as imported variations, analysts at HSBC Global Research said in a report on 15 August. In the best-case situation, HSBC tasks Ola will have the ability to manufacture batteries at a worldwide high quality and yield degree that prices $15-20 decrease per KWh.
Some business watchers are constructive concerning the firm’s battery plans. If the enterprise works out as deliberate, it will probably allow Ola to make batteries no less than on the similar worth as imported variations.
“Ola’s go to-market and localization efforts are noteworthy and will appeal to traders seeking to play the electrification theme in India,” it mentioned.
Elara Capital, nevertheless, had a distinct view in its pre-IPO word. It identified that funding in cell manufacturing is a double-edged sword as a result of to assert superior chemistry cell (ACC) PLI, Ola will must ramp up capability to 20GWh by FY28, whereas captive demand may very well be a lot decrease. “Hence, if Ola Electric doesn’t get OEM prospects for its cell manufacturing, it will current a problem. Even Tesla is discovering the going powerful to stabilize 4680 cells; therefore, scale and value advantages could be tough to comprehend for the 2W arm of Ola Electric,” it added.
Red flags
Analysts additionally produce other main considerations, together with EV penetration nonetheless being gradual, intense competitors within the fractured EV market, and uncertainty over regulatory help.
The Street is paying significantly shut consideration to the intensifying competitors, provided that Ola because the market chief has probably the most to lose if legacy producers herald engaging EV choices.
“We consider Ola Electric’s EV market share shouldn’t be sustainable, given friends have but to ramp up their product portfolio and distribution community,” Elara Capital mentioned in its pre-IPO word.
And, regardless of the success of the S1 scooter—the results of a canny acquisition of Netherlands-based Etergo in 2020, there are nonetheless lingering questions on Ola’s actual capability to design and produce a car from the bottom up.
The Street is paying significantly shut consideration to the intensifying competitors, provided that Ola because the market chief has probably the most to lose if legacy producers herald engaging EV choices.
Shortly after it unveiled the motorbikes on 15 August, some netizens alleged it had ripped off product photographs from Zero Motorcycles, a California-based electrical bike model.
Then, there are the way more critical allegations of Ola copying maps from MapmyIndia, violating a license settlement from 2021, when it launched its personal Ola Maps on 5 July. On 29 July, CE Info Systems, the dad or mum firm of MapmyIndia, served a authorized discover on Ola Electric, which had used its maps within the S1 Pro scooter since 2022.
“You have duplicated our consumer’s API (utility programming interface) and SDKs (software program improvement kits) from proprietary sources belonging to our consumer to construct Ola Maps. It is firmly said that our consumer’s unique knowledge has been copied/derived by you to additional your unlawful motive and in your unjust industrial features,” CE Info Systems’ legal professionals mentioned within the discover.
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Aggarwal responded to the allegations in his ordinary nonchalant, dismissive approach. “Empty vessels make extra noise. In the run-up to our IPO, they made plenty of sound. They have been completely opportunistic about it. We despatched them a robust response; we needed to cope with them after the IPO,” he mentioned on 15 August.
His signature “my approach or the freeway” angle can be seen as the explanation for the corporate’s high attrition charge. In the DRHP filed in December 2023, Ola had mentioned it had 3,733 staff on the rolls as of October 2023, and an attrition charge of 47.48%.
“The tone on the prime shapes the tradition of any group. While Ola’s speedy development is commonly credited to Bhavish’s dedication and drive, a number of senior-level departures have reportedly occurred because of ideological variations with him,” said Protiviti’s Kumar. “So far, the market has not responded negatively to these exits. But with Ola going public, there will be heightened scrutiny on corporate governance and organizational stability,” he added.
Maverick CEOs like Aggarwal, who is commonly in comparison with Tesla’s Elon Musk, are a rarity in India. The begin has been nice however will traders have the abdomen for the trip forward?
