Ola Electric is one of the largest electric vehicle companies in India’s fast-growing EV market. It is emerging for its highly awaited Initial Public Offering, opening on August 2, 2024. With subscription due dates nearing, it shall be important to understand the details of this offering and assess probable benefits against risks before making an investment decision.
The IPO would be issuing 723,684,210 equity shares. It could be about Rs 5,500 crore worth. At an additional offer for sale by current promoters and investors, there would be 84,941,997 shares sold for Rs 645.56 crore. Shares are proposed to be priced in the band of Rs 72 to Rs 76 per share, which, at a minimum lot size of 195 shares, means a minimum investment of Rs 14,820.
Bhavish Aggarwal-led Ola Electric holds a market share of 35% in the Indian electric two-wheeler market. The pace with which the company is growing fast and new initiatives being taken by it related to the development of EV technology has so far made it one of the most prominent EV companies. However, while the IPO does come as a positive opportunity, its long-term implications will have to be very carefully observed.
Long-Term Benefits
Here are some of the reasons why an investment in the IPO of Ola Electric may prove beneficial. Firstly, the leadership in electric scooter-related markets provides a strong base for future growth. In India, there is immense potential for the growth of EVs. Ola has already set several ambitious targets, which include augmenting the capacity of its gigafactory, significantly increasing production while taming costs, and leading to higher profitability in the future.
Moreover, increasing EV adoption aligns with global and national trends toward sustainable transport. If no other major player is strictly focused on electric two-wheelers, then Ola Electric could take advantage of the rising interest in eco-friendly vehicles. Continued R&D investments would help such a company stay ahead in the EV technology race.
Why to Buy
For the investors in this IPO, the outlook towards earning long-term gains is huge. If you are very optimistic about the future growth of Ola Electric and how EV adoption is going to increase in the coming times, then this IPO would be one of the valuable additions to your investment portfolio. It has given a massive opportunity to the investors who seek exposure to the electric vehicle sector through its leading market position and innovative strategies.
Why to Avoid
There are several factors to be cautious about on the other side. The company has reported widening losses, with net loss increasing to Rs 1,584.44 crore in FY24 from Rs 1,472.07 crore in FY23. While this is representative of the aggressive investment and expansion that the business is going through, it is also a pointer to the risks associated with investing in a company still growing.
The IPO valuation at a Marketcap/Sales ratio of 6.6x could be seen as steep against global automobile entities, usually trading between 1-8 times Marketcap/Sales. This would, therefore, suggest that the IPO has been priced at the higher end and may consequently have limited upside in the near term.
Caution Signals
One should not remain unaware of the inherent risks with this IPO. Though Ola Electric commands a major stake in the rapidly changing EV market, market conditions can change very fast. Current financial challenges that the company is undergoing and overall volatility in the stock market may affect the performance of the Ola Electric shares post-IPO.
One has to research enough and consider his or her financial condition and investment goals before taking a decision. Investment in an IPO is highly risky, and the short-term volatility factor has to be kept in mind.
Though Ola Electric’s IPO provides an exciting opportunity to be a part of the EV revolution, this view must be contrasted with associated risks. Make informed decisions or consult a financial advisor if needed, concerning whether this investment aligns with your long-term financial strategy.
Warning: Investing in IPOs can be risky, and it is essential to conduct thorough research and understand the financial health of the company before making any investment. Consider your risk tolerance and investment goals, and be prepared for potential volatility in the short term