India’s EV Giant Ola Electric Makes a Strong Market Entry
Bengaluru: Ola Electric Mobility made a strong market debut as its shares surged 20% on Friday. Raising the company’s valuation to $4.8 billion. The surge is on the back of rising optimism in the electric vehicle sector. Especially in India—home to the world’s largest two-wheeler market.
It opened at its IPO price of Rs 76, but investor enthusiasm soon ramped it up to Rs 91.20. Outperforming the wider market’s 1% gain. The $734 million brings Ola Electric’s IPO as the country’s biggest so far in 2024.
The company has risen to become one of the top companies in a budding Indian EV market, even though electric vehicle adoption remains extremely low. That doesn’t suggest any momentum—and certainly the opposite is true—because of the expedited clean energy initiatives of Prime Minister Narendra Modi.
Ola Electric’s Stellar Debut: Riding High on EV and Market Optimism
A resilient mood in the broader stock market was also a factor behind Ola Electric’s performance on its listing day. That surely must have emboldened investor sentiment towards Ola Electric, with the Nifty 50 index—the benchmark of the National Stock Exchange—sinking 2.7% on Monday over fears of a US recession, and the bounce-back has been sharp with nearly 1.3% gains in the last four trading sessions.
Ola Electric has established itself as the outright leader in the Indian electric scooter market. Cornering a significant 39% market share as of July. Considering that this company started its journey just three years ago, what it has achieved is simply phenomenal. The investors are also waiting for Ola Electric’s entry into the motorcycle segment. Which contributes two-thirds of the two-wheeler market in India.
Prashanth Tapse, senior vice president of research at Mehta Equities, said “Despite receiving demand well below street expectation, Ola listed well above street expectations, which can be attributed to market mood,“
Ola Electric’s Debut: A Strong Start, But Challenges Ahead
The flat listing of Ola Electric shares seems to have piqued the interest of investors who missed subscribing to the IPO. The rise in the stock thereafter was supported by these investors. “The flat opening seems to have encouraged investors who weren’t allotted shares in the IPO to hop on, and they seem to be optimistic about Ola’s motorcycle launch,” said Varun Baxi, lead analyst, Nirmal Bang Institutional Equities.
Even though Ola Electric has had rapid revenue growth, it has yet to find its feet in terms of profitability. The net sales have jumped 90% year-on-year for the fiscal ending in March. The net losses widened by 8% during the same period as challenges in scaling up a business in the fiercely competitive EV market made themselves manifest.
Ola Electric CEO Outlines Growth and Profitability Strategy
Ola Electric founder Bhavish Aggarwal outlined the strategic focus of the company following its successful market debut. Speaking to CNBC-TV18 after the listing bell ceremony, Aggarwal emphasized that the company would deliver profitable growth for its investors. “Our focus will be on building profitable growth so that investors also feel there is a long-term profitability journey here too,” he said.
With close to $660 million in IPO proceeds, Ola Electric will plough most of the funds raised into research and development and its battery cell manufacturing facility. The company has the view that this kind of vertical integration is necessary for the battery supply chain.
Aggarwal nodded to the fact that Ola Electric has entered a growth phase with massive investments in its future expansion. Commercial production of its in-house-made battery cells will start early in 2025. Making a move it claims will be a game-changer in terms of affordability and profitability.
