India’s prominent EV scooter maker – Ola Electric is coming out with its Initial Public Offering (IPO) on August 2nd, 2024. It marks the first time a company that exclusively makes electric vehicles is going public. Company is offering shares worth Rs. 5,500 crores to the public.
1. Company Overview
Ola Electric manufactures electric two wheelers. It is based in Bengaluru. It has manufacturing facilities in Krishnagiri, Tamil Nadu. Business Model involves the entire EV supply chain – from R & D into battery storage and technology to manufacturing to self-owned supply chain direct-to-consumer.
2. Financial Performance
| Fiscal Year | Revenue (₹ Crore) | Net Loss (₹ Crore) |
|---|---|---|
| FY21 | 456 | Data unavailable |
| FY22 | 2,782 | 784 |
| FY23 | 2,631 | 1,472 |
| FY24 | 5,009.80 | 1,584.40 |
Company has almost doubled its loss in the last two years owing to increased operating expense.
3. Use of IPO Money
IPO money will be used to address the losses and the debt and fuel further growth.
4. Valuation
Company is being valued at approximately 35,000 crores as per the issue.
Despite the fact that the company is a part of a sunrise sector, I am letting the IPO pass. Some of my strong reasons to avoid the IPO are:
- Company is loss making. I usually never invest in companies that are loss making. Company has shown no decreasing trends in losses, losses have only widened over the years, even though the revenue has registered a strong growth.
- The EV market slowdown globally has hampered the growth of EV manufacturers and sellers worldwide. The slowdown is attributed to:
- Weakening global demand.
- Lack of charging infrastructure.
- Lack of public trust.
- Price wars owing to competitive landscape.
- The IPO valuation is lower than what was earlier claimed by the company in September, 2023, indicating that the investors interest in the company could have dipped in the meantime.
- Ola Electric has faced complaints about accidents previously with scooters accelerating on their own, catching fire, breaking failures etc. This has led to a trust deficit in the Ola Scooters.
- Companies with similar financial performance previously have failed to deliver solid stock market performance and unless the company can give a very clear path to profitability, there are little reasons to believe Ola Electric is going to be any different from the Nykaas and PayTMs and Delhiverys. Given the intense slowdown in EV demand worldwide, I am skeptical about the company’s growth in the future.
Although there are strong to invest in the IPO too, I am letting those pass for now, since I don’t want to leave my readers in doubt as to what I am doing. Maybe in a separate blog post, we can independently discuss the pros from a disjoint standpoint.
Thanks for reading, have a great week ahead!