MUMBAI: The much anticipated initial public offering (IPO) of Ola Electric was subscribed 4.26 times on the final day of bidding, receiving bids for 198.16 crore equity shares against 46.52 crore shares on offer. The low subscription level came despite the leading electric two-wheeler company’s valuation eased to about $4 billion ahead of the Rs 6,145 crore IPO.
Categories-wise, the heavy lifting was done by Qualified Institutional Buyers (QIBs) and retail investors as their portion was subscribed 5.31 times and 3.86 times the allotted quota, respectively. The non-institutional investors (High Net-worth Individuals) bid 2.39 times the portion set aside for them. The portion set aside for employees was subscribed 11.66 times against the reserved portion.
Owing to low enthusiasm and rising volatility in the broader market, the grey market premium (GMP) of Ola Electric has fallen sharply in recent times, indicating a not-so-buoyant listing gain. Last checked, Ola Electric was commanding no premium in the unofficial market.
Brokerage firms and analysts too have mixed views on the IPO as they expect Ola Electric to incur losses. They are also not satisfied with the $4 billion valuation. The Bengaluru-based reported a net loss of Rs 1,584.40 crore with a revenue of Rs 5,243.27 crore for the financial year ended on March 31, 2024.
Ola Electric is demanding an EV/sales multiple of 6.3 times, which is at a significant premium, said Choice Broking in a note. It added that key concern for the company is its reliance on government subsidies for generating sales and its loss-making operations.
Elara Securities in an IPO note said Ola Electric’s EV market share of CY24TD is not sustainable, given peers are yet to ramp up their product portfolio and distribution network. Elara added that Ola’s investment in cell manufacturing is a double-edged sword because to claim advanced chemistry cell (ACC) PLI, it will have to ramp up capacity to 20GWh by FY28 while captive demand could be much lower. Hence, if Ola Electric does not get OEM customers for its cell manufacturing, it would present a challenge.
InCread Equities said that a cut in IPO valuation to $4 billion eases valuation risk at 6.8xFY24 sales versus global EV peers at 3-8xCY23F. “We are constructive on IPO, however, quarterly volatility from policy, EV cell plant delay penalty risk and regular PE share sale to limit stock price gains. EV cell production success can extend an option value of Rs.7-10 per share,” it stated.
For Ola Electric, the IPO will provide the much-needed impetus to invest in enhancing cell manufacturing capacity and research and development on future technologies and products.
According to its prospectus, the company plans to utilise Rs 1,227.6 crore out of the proceeds of its Rs 5,500-crore public issue on capacity expansion of its cell manufacturing plant to 6.4 GWh from 5 GWh.
The company is also looking to use Rs 1,600 crore from the fresh fund on research and product development, another Rs 800 crore will be deployed to repay debts and Rs 350 crore for organic growth initiatives.