Ola Electric fixes IPO price band at Rs 72-76; looks to start operations at gigafactory early 2025

Mumbai: Softbank-backed two-wheeler maker Ola Electric Mobility on Monday fixed the price band at Rs 72-76 per equity share for its Rs 6,100-crore initial public offering (IPO) which will hit the capital market on August 2.

The company also said that the trial production of its gigafactory are currently on and the operations are set to commence early next year.

The IPO, a combination of a fresh issue of equity shares up to Rs 5,500 crore and an offer for sale (OFS) of 8.49 crore equity shares by promoters and investors, will close on August 6. Under the OFS, Ola Electric founder Bhavish Aggarwal will offload around 3.8 crore shares.

Investors can bid for a minimum of 197 equity shares and in multiples of it thereafter, the company said.

Of the total IPO proceeds, Rs 1,227.6 crore will be allocated to increase the capacity of its cell manufacturing plant from 5 GWh to 6.4 GWh while Rs 1,600 crore will be invested in research and product development, Ola said.

Besides, the company will use Rs 800 crore for the repayment of existing debts and Rs 350 crore for organic growth initiatives.

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.

"We have already started trial production and are rigorously testing the facility," Ola Electric Mobility Chairman Bhavish Aggarwal said.

Phase 1 (a) and Phase 1 (b) of the set-up and expansion of the Ola Gigafactory at Krishnagiri district in Tamil Nadu will be funded from internal accruals and long-term borrowings availed by its arm Ola Cell Technologies Pvt Ltd (OCT), the company said.

Phase 1 (a) is expected to be completed by March 2024 and the gigafactory will have a capacity of 1.4 GWh. In the Phase 1 (b), the capacity will be increased to 5 GWh by October 2024. These will be funded from internal accruals and long-term borrowings availed by OCT, it added.

On the profitability path, Aggarwal said, "Our scale is increasing and operating leverage is improving." And in manufacturing businesses, the operating leverage is very important in terms of profitability. "The gross margin has gone up to 16 per cent from 7 per cent and an EBITDA margin has gone from negative 43 to negative 19 in just one year and the first quarter of this year," he said.

The revenue has gone up 90 per cent over FY23 while volumes are continuing to increase (as per VAHAN portal), he added.

Another thing is the vertical integration of the core components that the company is doing, he said, added, "So the next step in that is the cell, which is one-third of the vehicle's cost and as we start manufacturing our cell in India early next year that is when another large margin change will happen".

The company's focus remains firmly on long-term success, he stated.

"We are the leaders in terms of numbers, and we also built a very unique strategy for electric vehicles which is vertically integrated in manufacturing and core Research & Development in-house.

"This strategy has helped us build market leadership as well as launch small products sooner into the market," he said.

According to him, the company's market share in the last fiscal stood at 35 per cent, while in the March quarter of FY24, it stood at 39 per cent.

He said that Ola Electric Mobility is very "optimistic" about India's future in new energy and it wants to be one of the leaders in this space and added that as against 4 per cent EV penetration in the country in 2022-23, it is estimated to grow to 40-odd per cent of the total market by 2030.

On the four-wheeler prospects, Aggarwal said, "Our focus is to build the foundation for the EV ecosystem in India and we made a starting point from a product point of view with the scooter. We are moving to the broader pie and our immediate forecast is on these two-wheeler products.

And Ola's focus is to build cell as a foundation layer for any future product upon any company which wants to buy the cell, he added.