OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is intended to convey the managements perspective on our financial condition and results of operations for Fiscals 2024, 2023 and 2022. Unless otherwise stated, the financial information in this section has been derived from the Restated Consolidated Financial Information included in this Red Herring Prospectus.
Our financial year ends on March 31 of each year. Accordingly, references to "Fiscal 2024" "Fiscal 2023" and "Fiscal 2022" are to the 12-month period ended March 31 of the relevant year.
Ind AS differs in certain respects from Indian GAAP, IFRS and U.S. GAAP and other accounting principles with which prospective investors may be familiar. Please also see "Risk Factors Significant differences exist between Indian accounting standard ("Ind AS") and other accounting principles, such as international financial reporting standards ("IFRS") and United States generally accepted accounting principles ("US GAAP"), which may be material to investors assessments of our financial condition" on page 74.
This discussion contains certain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as the risks set forth in the chapters entitled "Risk Factors" and "Forward-Looking Statements" on pages 29 and 27, respectively.
Industry and market data used in this section have been extracted from the Redseer Report, which has been commissioned by our Company exclusively in connection with the Offer for the purposes of confirming our understanding of the industry in which we operate.
OVERVIEW
We are a pure electric vehicle ("EV") player in India and are building vertically integrated technology and manufacturing capabilities for EVs and EV components, including cells. With our in-house R&D and technology, we design and develop certain core EV components in-house and new EV products internally, such as the motor and drivetrain, battery packs, electronics and software which operate and integrate the EV systems. We manufacture EVs and certain core EV components like battery packs, motors and vehicle frames at the Ola Futurefactory.
We operate our own direct-to-customer ("D2C") omnichannel distribution network comprising 870 experience centres and 431 service centres (of which 429 service centres are located within experience centres) as at March 31, 2024 in addition to our Ola Electric website. Our network of experience centres was Indias largest company-owned network of experience centres as at March 31, 2024 according to the Redseer Report.
Our current EV scooter Generation 2 platform is the base for the Ola S1 scooter models - Ola S1 Pro, Ola S1 Air, Ola S1 X+, Ola S1 X (2 kWh), Ola S1 X (3 kWh) and Ola S1 X (4 kWh). We commenced delivery of our first EV model, the Ola S1 Pro, in December 2021. This was followed by the Ola S1 in September 2022, the Ola S1 Air in August 2023, the Ola S1 X+ in December 2023 and the Ola S1 X (2 kWh), the Ola S1 X (3 kWh) and the Ola S1 X (4 kWh) in May 2024. Within nine months of delivering our first EV scooter, the Ola S1 Pro in December 2021, we became the best-selling E2W brand in India in terms of monthly E2W registrations on the VAHAN Portal of Ministry of Road Transport and Highways ("VAHAN"), with a market share of over 38% in terms of vehicle registrations in the Fiscal 2024, based on VAHAN, according to the Redseer Report. We sold a total of 506,817 units of Ola S1, Ola S1 Pro, Ola S1 Air and Ola S1 X+ from inception through March 31, 2024. In addition, on August 15, 2023, we announced a line-up of motorcycles comprising four models, Diamondhead, Adventure, Roadster and Cruiser.
We plan to begin delivering the new motorcycle models in the first half of Fiscal 2026. We plan to further launch affordable mass market Ola S1 models, including E2Ws targeted at the personal, business to business and last-mile delivery segment by the Fiscal 2025, to capture a broader base of consumers across different product types and price points in the long run.
We are building our EV hub in Krishnagiri and Dharmapuri districts in Tamil Nadu, India, which includes our Ola Futurefactory, our upcoming Ola Gigafactory and co-located suppliers in Krishnagiri district. At our Ola Futurefactory, we manufacture our EV scooters using certain EV components manufactured in-house and other components procured from third parties, such as cells.
The Ola Futurefactory is the largest integrated and automated E2W manufacturing plant in India (in terms of production capacity) by an E2W-only OEM as at March 31, 2024, according to the Redseer Report, with an installed capacity of one million units per year as at March 31, 2024. While we currently source cells from suppliers, we are in the process of developing cell technologies and cell manufacturing processes for use in the Ola Gigafactory. Phase 1(a) of the Ola Gigafactory started commercial operations on March 22, 2024 and the set up was completed on May 31, 2024.
For more details on our business, see "Our Business" on page 187.
OUR BUSINESS MODEL
Revenue
We derive revenue primarily from the sale of scooters, vehicle accessories, including spare parts for vehicle repairs and chargers and related services.
We commenced delivery of our first scooter, the Ola S1 Pro, in December 2021, followed by the Ola S1 in September 2022, the Ola S1 Air in August 2023 and the Ola S1 X+ in December 2023 and the Ola S1 X (2 kWh), the Ola S1 X (3 kWh) and the Ola S1 X (4 kWh) in May 2024. We sold a total of 506,817 units of Ola S1, Ola S1 Pro, Ola S1 Air and Ola S1 X+ from inception through March 31, 2024. Pre-booking of our newly announced scooter models, the Ola S1 X+, Ola S1 X (2 kWh) and the Ola S1 X (3 kWh), and motorcycles, Diamondhead, Adventure, Roadster and Cruiser, commenced in August 2023, following which we commenced delivery of the Ola S1 X+ in December 2023 and the Ola S1 X (2 kWh) and Ola S1 X (3 kWh) in May 2024. Pre-booking of the Ola S1 X (4 kWh) commenced in February 2024 following which we commenced delivery in May 2024. We plan to begin delivering the new motorcycle models, Diamondhead, Adventure, Roadster and Cruiser, in the first half of Fiscal 2026.
We recognise revenue from the sale of products upon delivery of the goods to the customer. Deposits received from customers for vehicle purchases are recorded as advances received from customers and are recognised as revenue upon the delivery of the scooter to and the same-day registration of vehicle title for the customer. For Fiscal 2022, we recognised revenue for Ola S1 Pro upon commencement of deliveries from December 2021. Our revenue from the sale of finished products in Fiscals 2024, 2023 and 2022 constituted 91.89%, 87.55% and 85.07%, of our revenue from operations for such respective periods. Finished products sold during such periods comprise the Ola S1, Ola S1 Pro, Ola S1 Air and Ola S1 X+. Revenue is recognised exclusive of goods and services tax and net of returns and trade discounts.
Prior to March 31, 2023, customers purchasing our scooters paid for chargers separately. From March 31, 2023 onwards, chargers are included with all scooter purchases.
We recognise revenue from the provision of services to our customers, such as assisting customers with installing wall mount chargers in return for a service fee. Prior to August 2023, we also generated revenue from selling services related to vehicle performance upgrades whereby customers purchasing the Ola S1 Pro (first generation) had the option to pay for additional features for their scooters. In addition, we assist customers with vehicle registrations through a third-party service provider and pass-through service fees paid by the customer to the service provider. In Fiscal 2021, we also provided battery swapping services on a trial basis to EV owners who subscribed for such services, whereby we helped EV users replace discharged battery packs with full charged ones, and generated swapping and subscription income from providing such services.
The following graph indicates our scooter sales volume for the periods indicated.
Scooter Sales Volume (Units)
Expenses
Our major expenses include (i) cost of materials consumed, including the purchase of stock-in-trade and change in inventories (ii) employee benefits expense, (iii) research and development expenses, and (iv) certain other expenses such as provision for warranties, technology cost, selling and distribution expenses, and advertising, marketing and sales promotion.
Cost of materials consumed
The cost of materials consumed reflects the cost of raw materials used in the production of our scooters, and represented 87.65%, 95.21%, 156.64% of our revenue from operations in Fiscals 2024, 2023 and 2022, respectively. We track bill of materials ("BOM") cost which represents the cost price of the scooter. We have designed most of our key components relating to electronics, cell and battery systems, software and drivetrain in-house, including designing an electric powertrain, which includes a modular battery pack with BMS, motors and power electronics module. Leveraging our manufacturing capabilities, we also manufacture the battery packs, motors (starting on August 1, 2023) and vehicle frames in-house, and source other components, such as tires, suspension, cells and semiconductor chips, from third party domestic and foreign suppliers.
We purchase chargers and other vehicle accessories, such as spare parts and wall mounts from third party suppliers, to resell to customers. We record the purchase cost of the chargers and vehicle accessories as purchase of stock-in-trade. Changes in inventories of finished goods including scooters and spare parts, stock-in-trade and work-in-progress comprise changes in the amount of work-in-progress scooters, spare parts and stock-in-trade in our inventory.
Our medium to long-term plans place emphasis on backward integration for greater control over our supply chain. For example, while we currently source cells from suppliers, we are in the process of developing cell technologies and cell manufacturing processes for use in the Ola Gigafactory. Phase 1(a) of the Ola Gigafactory started commercial operations on March 22, 2024 and the set up was completed on May 31, 2024. We intend to expand our Ola Gigafactory in phases to further increase our in-house cell manufacturing capabilities. For raw materials and processing facilities that we do not currently own, we are in the process of assessing the feasibility of a variety of options, such as long-term supply agreements and direct or indirect ownership to secure an uninterrupted supply for our production. Such arrangements could give us greater control of our supply chain and production schedule and procure supplies at lower prices, thereby enabling us to price our products more competitively.
R&D spend
We have devoted significant resources towards our R&D activities, which centre around developing technology and manufacturing capabilities for EVs and EV components. Our R&D spend comprises research costs and additions to intangible assets under development. Research costs are recognized in our statement of profit and losses and comprise expenditure on initial R&D activities in India, the UK and the US, with a focus on designing and developing core EV components and new EV products, and at our BIC, with a focus on developing cell and battery technology and manufacturing processes, which have yet to be approved for development or commercial use. Such expenditures, which include the cost of testing materials and services, salaries of on-roll and off-roll employees on our R&D team, consultant fees, rent and amortisation expenses in relation to licensing fees, are recognized in our statement of profit and loss as incurred.
In accordance with Ind AS 38, we capitalize these expenditures as additions to intangible assets under development once the product or process under research is determined to be technically and commercially feasible and likely to result in future economic benefits, and we have approved the development of such product or process for use or sale. Following such determination, the expenditures incurred in connection with such approved projects which can be reliably measured are capitalized as additions to intangible assets under development. The internally generated intangible assets are measured at cost less accumulated amortization and any accumulated impairment losses.
We expect our R&D spend to increase for the foreseeable future as we continue to invest in R&D activities to expand our product offerings and manufacture EVs in a cost-efficient manner.
Our R&D spend in Fiscals 2024, 2023 and 2022 amounted to 3,851.06 million (comprising research costs of 789.41 million and additions to intangible assets under development of 3,061.65 million), 5,077.11 million (comprising research costs of 860.82 million and additions to intangible assets under development of 4,216.29 million) and 1,758.40 million (comprising research costs of 156.90 million and additions to intangible assets under development of 1,601.50 million) respectively, comprising 7.34%, 18.25% and 38.54% of our total income for such periods, respectively.
The following graph indicates our R&D spend for the periods indicated.
Employee benefits expense
Our employee benefits expense consists of salaries, wages, bonuses, gratuity, compensated absences, contributions to provident funds, share based payments and staff welfare expenses paid to our employees. We had 4,011 on-roll employees and 3,358 off-roll employees as at March 31, 2024.
Other expenses
Our other expenses primarily include (i) our expenses in providing repair services for scooters and battery packs under warranty, (ii) manpower supply charges (iii) research cost that has been incurred, (iv) technology cost, including fees to purchase and license software and cloud storage fees, (v) legal and professional fees, (vi) freight and forwarding charges and (vii) advertising, marketing and sales promotion expenses in undertaking digital marketing, brand marketing and promotional events to promote our scooters.
We make provisions for our warranty obligations. As at March 31, 2024, our warranty comprised a standard warranty of three years/40,000 km (whichever is earlier) on our battery and EV scooter components and a warranty of eight years/80,000 km (whichever is earlier) on our battery packs from February 2, 2024. From February 3, 2024, we also introduced an option to extend our standard warranty for battery packs on all our EV scooter models for an additional period of eight years/100,000 km for a fee ranging from 4,999 to 6,999 (exclusive of GST) depending on the battery capacity or for an additional period of eight years/125,000 km on all models excluding the Ola S1 X (2kWh) for a fee ranging from 12,999 to 14,999 (exclusive of GST) depending on the battery capacity. We have back-to-back insurance cover for any liabilities arising from extended warranties sold. Provisions for warranty are recognised when the product is sold to the customer and is based on management estimate of product failure rates which is derived from continual evaluation of tracked product failure rates for certain periods of time. The initial estimate of warranty-related costs is revised annually. Our provision for warranties were 1,592.71 million, 446.73 million and 128.54 million as at March 31, 2024, March 31, 2023 and March 31, 2022, respectively.
Up to June 2023, our selling and distribution expenses comprised a fee that we paid to our Group Company, Ola Fleet Technologies Private Limited, in relation to the operation of our experience centres and service centres. The selling and distribution expenses were 418.25 million, 722.63 million and 353.30 million in Fiscals 2024, 2023 and 2022, respectively. Starting on July 1, 2023, we assumed control of the operation of our experience centres and service centres and were no longer required to pay such fees starting from July 1, 2023.
The following graph indicates our Adjusted Gross Margin % for the periods indicated.
Note: Adjusted Gross Margin is a non-GAAP measure is computed by deducting cost of materials consumed, purchase of stock-in-trade and change in inventories of finished goods, stock-in-trade and work-in-progress (excluding certain other direct expenses such as employee benefit expenses and other expenses) from total income. Adjusted Gross Margin % is defined as Adjusted Gross Margin for the relevant period divided by total income for such period. For reconciliation, please see " Summary Results of Operations Non-GAAP Measures" on page 347.
PRINCIPAL FACTORS AFFECTING OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our results of operations and financial condition are affected by a number of important factors, including:
Ability to access broad customer segments through our D2C model and product portfolio
Our ability to ensure customer satisfaction and retain and expand our customer base is dependent on our ability to offer a seamless and satisfactory customer service. We strive to enhance the customer experience through our D2C omnichannel distribution model, comprising our digitally-enabled pan-India network of experience centres and service centres.
Our customers have access to an all-digital experience throughout the sales process and after-sales service through our Ola Electric website, from product discovery to EV scooter ownership, including booking test rides, booking/purchasing the EV scooter and brand engagement, to booking and tracking the status of after-sales services at our service centres through the Ola Electric Companion app. We also offer customers the opportunity to see, touch and test drive our EV scooters at our experience centres prior to purchasing the EV scooter online. We facilitate financing for our customers through one of our Group Companies,
Ola Financial Services Private Limited ("OFS") and in partnership with 12 financial institutions that offer loan tenures of up to five years as at March 31, 2024 in order to give our customers greater access to capital to fund their EV purchase. We believe that our D2C omnichannel distribution model enables us to directly connect with our customers and design the customer experience.
Our ability to attract new customers also depends on the scale and efficiency of our experience centres and service centres. We aim to expand our customer reach through the expansion of our network of experience centres and service centres across India. We also aim to further expand our network of charging stations across India in the near-term to provide added convenience to our customers in charging their scooters. See "Objects of the Offer" on page 122. In particular, our ability to grow our customer base significantly depends on our ability to further expand our customer reach into high density areas office complexes, malls and educational institutes and develop a complete EV ecosystem complete with a charging infrastructure.
We commenced delivery of the Ola S1 X+ in December 2023 and commenced delivering the Ola S1 X (2 kWh), the Ola S1 X (3 kWh) and the Ola S1 X (4 kWh) in May 2024. We plan to commence delivery of the new motorcycle models, Diamondhead, Adventure, Roadster and Cruiser, in the first half of Fiscal 2026. We plan to further launch affordable mass market Ola S1 models, including E2Ws targeted at the personal, business to business and last-mile delivery segment, to capture a broader base of consumers across different product types and price points in the long run.
Enhancing manufacturing capabilities with vertical integration and supply chain management
We manufacture our EVs and certain core EV components, like battery packs, motors and vehicle frames, at our Ola Futurefactory. We are building our Ola Gigafactory for cell manufacturing.
We have adopted a vertically integrated approach to manufacturing that combines our in-house R&D, engineering and manufacturing capabilities to develop our EVs while optimising costs. We plan to increasingly localise our supply sources, including by co-locating suppliers within our EV hub and sourcing from them, in order to lower the cost of materials consumed, as the cost of materials consumed in the production of vehicles comprised a significant portion of our expenses, representing 87.65%, 95.21%, 156.64% of our revenue from operations in Fiscals 2024, 2023 and 2022, respectively. Our medium to long-term plans also place emphasis on backward integration for greater control over our supply chain.
For example, batteries for our EV scooters constituted approximately 32% of the BOM for Ola S1 Pro scooters as at March 31, 2024. While we currently source cells from suppliers, we are in the process of developing cell technologies and cell manufacturing processes for use in the Ola Gigafactory, which is currently under construction within the EV hub and expected to be operational by March 31, 2024. For raw materials and processing facilities that we do not currently own, we are in the process of assessing the feasibility of a variety of options, such as long-term supply agreements and direct or indirect ownership to secure an uninterrupted supply for our production. Such arrangements could give us greater control of our supply chain and production schedule, enabling us to price our products more competitively. We expect to derive a significant cost advantage through control over the full value chain, which will help drive our future profitability.
Expansion of our manufacturing capability requires us to make significant capital expenditures. The amount and timing of our future production capacity requirements and resulting capital expenditures, will depend on many factors, including the pace and results of our R&D efforts, and our ability to develop and launch new products, achieve sales and enter new markets. While we have laid out a blueprint for a cost-efficient capacity expansion, our expansion project could be subject to delays or other difficulties, which could increase our costs.
In-house R&D, design and technology leadership
Technology is at the core of our business model with a focus on in-house product innovation. We have invested a significant amount of capital into R&D to develop vertically integrated technology and manufacturing capabilities for EVs and EV components, including cells.
We undertake R&D activities in India, the UK and the US, focused on designing and developing new EV products and core EV components. We have designed most of our core EV components relating to electronics, cell and battery systems, software and drivetrain in-house, including an electric powertrain, which has a modular design that incorporates key components that we designed in-house, such as a modular battery pack that varies in size depending on the EV model and a BMS, as well as motors and power electronics modules. We developed the MoveOS software that powers our scooters and built in various features that enhance the customer experience, such as keyless entry, cruise control and on-screen navigation. At our Ola Futurefactory, we manufacture our EV scooters using certain EV components manufactured in-house, such as battery packs, motors and vehicle frames (which we started manufacturing on August 1, 2023), and other components procured from third parties, such as cells. We are in the process of developing cell technologies and cell manufacturing processes for use in the Ola Gigafactory. Phase 1(a) of the Ola Gigafactory started commercial operations on March 22, 2024 and the set up was completed on May 31, 2024.
Our control over R&D, vehicle engineering and manufacturing has allowed us to develop a differentiated and integrated vehicle architecture that is adaptable for different EV models. We believe that building our future vehicles from a common platform will allow us to develop new vehicles more quickly and at lower costs. We plan to leverage the economies of scale generated through this platform approach to reduce our BOM cost and R&D spend. For example, our platform model enabled us to announce six new EV scooter models, the Ola S1, the Ola S1 Air, the Ola S1 X+, the Ola S1 X (2 kWh), the Ola S1 X (3 kWh) and the Ola S1 X (4 kWh) after commencing delivery of our first product, the Ola S1 Pro, in December 2021. As at March 31, 2024, 86.60% of the components used in three of our EV scooter models, the Ola S1 Pro, the Ola S1 Air and the Ola S1 X+ are common across all three models.
We have transitioned from our Generation 1 platform to our Generation 2 platform, which is the current base for the Ola S1 scooter models Ola S1 Pro, Ola S1 Air, Ola S1 X+, Ola S1 X (2 kWh), Ola S1 X (3 kWh) and Ola S1 X (4 kWh). We commenced the manufacture of scooters on our Generation 2 platform at our Futurefactory in July 2023. Our Generation 2 platform enhances key features of our EV scooters such as acceleration, speed, range, motor power and battery performance as compared to the Generation 1 platform. We also plan to replicate the platform approach for our recently announced motorcycle range which comprises four models Diamondhead, Adventure, Roadster and Cruiser. The diagram below highlights the enhancements in certain key specifications in our Generation 2 platform compared to Generation 1 platform, based on the Ola S1 Pro model:
Comparison of the Ola S1 Pro on the Generation 1 Platform vs Generation 2 Platform Based on the Ola S1 Pro Model
Our R&D spend in Fiscals 2024, 2023 and 2022 amounted to 3,851.06 million (comprising research costs of 789.41 million and additions to intangible assets under development of 3,061.65 million), 5,077.11 million (comprising research costs of 860.82 million and additions to intangible assets under development of 4,216.29 million) and 1,758.40 million (comprising research costs of 156.90 million and additions to intangible assets under development of 1,601.50 million) respectively, comprising 7.34%, 18.25% and 38.54% of our total income for such periods, respectively. We plan to continue making substantial investments in R&D for the continued enhancement of the Ola S1 scooters and future generations of our EVs and other products and services.
Operating leverage and improving asset turnover
We believe that our business benefits from operating leverage.
Employee benefits expenses and other expenses as a percentage of total income (%)
The increase in revenue has not resulted in a commensurate increase in key operating expenses such as employee benefits expenses. Consequently, our employee benefits expenses as a percentage of total income decreased from 61.91% in Fiscal 2022 to 8.37% in Fiscal 2024. We have maintained a disciplined and targeted approach towards advertising and marketing expenses to drive our sales growth. Advertising, marketing and sales promotion expenses as a percentage of total income also decreased from 10.83% in Fiscal 2022 to 1.51% in Fiscal 2024.
We follow a disciplined approach in our R&D and fixed asset investments. Even as we continue to invest in R&D and technology, our R&D spend as a percentage of total income has decreased from 38.54% in Fiscal 2022 to 7.34% in Fiscal 2024. The economies of scale on our capital expenditure is reflected in our improving capital productivity, with our asset turnover ratio (i.e. revenue from operations divided by total fixed and intangible assets) improving from 0.34 in Fiscal 2022 to 1.56 in Fiscal 2024.
R&D spend as a percentage of total income (%)
Note: Asset turnover ratio is calculated as revenue from operations divided by total fixed and intangible assets.
Capital allocation strategy
Our capital allocation approach is to invest in R&D and technology, in order to design, engineer and manufacture core EV components in-house and establish an adaptable platform architecture to support our ongoing development and manufacturing of vehicles. Such platform generates cost efficiencies in the manufacturing of our products as we are able to adapt common components in assembling different EV models. Our strategy is to deploy our capital in a sequential manner. We plan to progress towards the production of our new motorcycle range announced in August 2023, comprising four models Diamondhead, Adventure, Roadster and Cruiser, after achieving margin efficiency for our scooter portfolio.
Our gradual buildout of the Ola Futurefactory, our modularised assembly line and our potential for manufacturing capacity expansion also enhance our ability to efficiently allocate capital. In line with our capital allocation approach, our cash flow used in investing activities for the acquisition of property, plant and equipment, acquisition of intangible assets and development expenditure on internally generated intangible assets in Fiscals 2024, 2023 and 2022 was 12,139.13 million (comprising acquisition of property, plant and equipment of 9,252.85 million, acquisition of intangible assets of 142.24 million and development expenditure on internally generated intangible assets of 2,744.04 million), 8,426.12 million (comprising acquisition of property, plant and equipment of 4,336.03 million, acquisition of intangible assets of 59.78 million and development expenditure on internally generated intangible assets of 4,030.31 million) and 8,872.80 million (comprising acquisition of property, plant and equipment of 7,635.70 million, acquisition of intangible assets of 133.80 million and development expenditure on internally generated intangible assets of 1,103.30 million), respectively. Our cash and cash equivalents as at March 31, 2024 were 1,071.14 million as compared to 2,429.09 million and 12,350.01 million as at March 31, 2023 and 2022, respectively. We will continue to focus on growing our product pipeline, expanding our manufacturing capacity and investing in R&D and our sales, service and charging networks.
Government incentive packages
Indias favourable policy environment is accelerating electrification of mobility in India, led by improved EV penetration across vehicle segments. The National Electric Mobility Mission Plan 2020 of GOI covers multiple incentives including lower GST and favourable registration fees for EVs. In 2020, the Indian government launched the PLI scheme to boost domestic manufacturing, reduce import dependence, encourage exports and generate employment. Indias automobile industry is a key beneficiary of PLI schemes related to the Automobile PLI Scheme, ACC PLI Scheme, and design and manufacturing of semiconductors. Further, after review of phase II of the FAME subsidies, MHI formulated the EMPS 2024. We are the only EV manufacturer in India that is a beneficiary of two Government of India PLI schemes one relating to the manufacture of advanced automotive technology products (the "Automobile PLI Scheme") and another relating to advanced cell chemistry batteries (the "Cell PLI Scheme"), according to the Redseer Report. Under the Cell and Automotive PLI
Schemes, all of the advanced chemistry cells and EVs that we manufacture and sell will qualify us for a cash incentive up until the specified cap under the schemes.
OET has been approved to be eligible for the Champion OEM Incentive Scheme under the Automobile PLI Scheme vide a letter of award dated February 22, 2022, from the Industrial Finance Corporation of India Limited, project management agency for PLI-Auto. Under the Automobile PLI Scheme, incentives are available for up to five consecutive financial years commencing from Fiscal 2023, where the incentive availed for a financial year will be disbursed in the subsequent financial year. The Automobile PLI Scheme requires approved applicants to apply for registration of their products as eligible advanced automotive technology vehicles, in respect of which pre-approval of the eligible product will be undertaken by the testing agency of the MHI, and a minimum 50% domestic value addition on the eligible product, that is required to be certified by the testing agency of MHI, for being eligible for incentives. Upon receipt of the approval certificate from the testing agencies, approved products would be eligible for incentive under the Automobile PLI Scheme. Under the Automobile PLI Scheme, our Ola S1 Air and Ola S1 Pro scooters are eligible for incentive amounts ranging between 13% and 18% of the "determined sales value" ("DSV"). We have obtained certifications on December 29, 2023 and February 9, 2024 respectively from the testing agencies of the MHI certifying that our Ola S1 Air and Ola S1 Pro (Gen2) scooters meet the scheme eligibility requirements. For details, see "Key Regulations and Policies" and "Government and Other Approvals" beginning on page 219 and 361.
Meanwhile, we have been awarded 20 GwH capacity under the Cell PLI Scheme vide a letter of award dated March 28, 2022 from the Ministry of Heavy Industries, Government of India, the most received by any Cell PLI recipients, according to the Redseer Report. The Cell PLI Scheme provides for a cash incentive to be distributed to our Company on a quarterly basis which is dependent on the percentage of value addition during the relevant period and actual sale of the advanced chemistry cells. We are eligible to receive the incentives under the Cell PLI Scheme over a five-year period from the commissioning date of our Ola Gigafactory, subject to fulfilment of certain conditions. Under the Cell PLI Scheme, we are required to manufacture cells as per the committed capacity specified in our bid. Accordingly, we are required to achieve 1 GwH capacity in the first year which we achieved on March 22, 2024, 5 GwH capacity in the second year, 10 GwH capacity in the third year and 20 GwH capacity by the fourth year. If we fail to achieve the agreed upon capacity each quarter, the Government of India has the right to deduct twice the shortfall in the committed capacity from the total subsidy payable to us. Furthermore, the Government of India has the right to discontinue payment of any subsidy and appropriate the performance security furnished by us in case we fail to achieve the agreed upon milestone. See "Risk Factors Any reduction or elimination of government incentives or the ineligibility of any of our electric vehicles for such incentives would increase the retail price of our electric vehicles and could adversely affect customer demand for our electric vehicles and affect our ability to achieve profitability." on page 32. In addition, all of our EV variants, comprising the Ola S1 X +, Ola S1 X+ (3 kWh), Ola S1 X+ (4 kWh), Ola S1 X (4 kWh), Ola S1 X (3 kWh), Ola S1 X (2 kWh), Ola S1 Air and Ola S1 Pro (Gen 2), are eligible for EMPS 2024 subsidies, as of the date of this Red Herring Prospectus. Customers who purchase our EV scooters are eligible to receive a cash subsidy from the government of 5,000 per kWh of battery capacity up to a maximum amount of 10,000 or 15% of the ex-factory price of the purchased scooter, as at the date of this Red Herring Prospectus. The Government of Indias EMPS 2024 subsidy seeks to encourage EV adoption and the development of the EV manufacturing ecosystem in India by providing a subsidy to customers who purchase EVs. We submit subsidy claims for reimbursement for EVs sold that meet the governments performance and efficiency eligibility criteria and demand incentives on monthly basis. The applicable EMPS 2024 subsidy is priced into the retail price of our EVs. Such subsidies help in lowering the cost of ownership of our products and potentially improve the demand for our vehicles. See "Risk Factors Any reduction or elimination of government incentives or the ineligibility of any of our electric vehicles for such incentives would increase the retail price of our electric vehicles and could adversely affect customer demand for our electric vehicles and affect our ability to achieve profitability." on page 32.
Pursuant to a memorandum of understanding ("MOU") between OET and the Government of Tamil Nadu dated February 18, 2023, we have leased land in Krishnagiri district, Tamil Nadu, spanning approximately 417.59 acres for the operation of our manufacturing facilities. In relation to the establishment of our EV hub in Tamil Nadu, the Government of Tamil Nadu awarded us a structured package of capital and revenue assistance which seeks to supports EV and cell manufacturing, to be granted over time. Accordingly, in Fiscal 2023, we became eligible to receive refunds on a portion of our capital expenditures on our EV hub and the GST paid to the Government of Tamil Nadu on our sales in Tamil Nadu. OET and OCT qualify for a lower corporate income tax rate of 15% available to new manufacturing domestic companies under Indian income tax law.
Growth of Indias economy and the evolving demand for EVs
Our results of operations are dependent on the overall economic conditions in India. Changes in Indias macroeconomic conditions, including changes in interest rates, government policies and incentives, tax regulations, political environment or other developments could affect consumer demand for and willingness to adopt EVs. In particular, the automotive market in India is subject to market and regulatory developments that are unlike those of automotive markets in other jurisdictions. See " Risk Factors Changing regulations in India could lead to new compliance requirements that are uncertain." on page 70.
We have benefited from the strong growth of Indias GDP and the demand for EVs in India, particularly E2Ws. E2W penetration in India is expected to expand from approximately 5.40% of the domestic 2W registrations reported on the VAHAN portal in Fiscal 2024 to 41-56% of the domestic 2W sales volume by Fiscal 2028, according to the Redseer Report.
CRITICAL ACCOUNTING POLICIES
A full description of our significant accounting policies adopted in the preparation of our Restated Consolidated Financial Information is provided in Note 3 to our Restated Consolidated Financial Information. See under "Restated Consolidated Financial Information Notes forming part of the Restated Consolidated Financial Information Note 3: Material Accounting Policies" on page 278. The critical accounting policies that our management believes to be the most significant are summarised below.
Property, plant and equipment
Recognition and measurement
The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
Items of property, plant and equipment (including capital work in progress) are measured at cost, which includes capitalised borrowing costs, less accumulated depreciation and accumulated impairment losses, if any.
Cost of an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the site on which it is located.
The cost of a self-constructed item of property, plant and equipment comprises the cost of materials and direct labour, any other costs directly attributable to bringing the item to working condition for its intended use, and estimated costs of dismantling and removing the item and restoring the site on which it is located.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in the Consolidated statement of profit and loss.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date are shown under as other non-current assets.
Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably.
Depreciation
Depreciation is calculated on cost of items of property, plant and equipment less their estimated residual values over their estimated useful lives using the straight-line method, and is generally recognised in statement of profit and loss.
The estimated useful lives of items of property, plant and equipment for the current and comparative periods are as follows:
Class of assets |
Management estimate of useful life in years | Useful life in years as per Schedule II |
| Building | 3 to 30 | 3 to 60 |
| Computer equipment | 2 to 3 | 3 |
| Computer server | 6 | 6 |
| Leasehold improvements | Over the primary lease period or useful life, whichever is shorter | N/A |
| Office equipment | 1 to 10 | 5 |
| Furniture and fixtures | 2 to 10 | 10 |
| Electronic equipment | 2 to 10 | 10 |
| Motor vehicles | 2 to 8 | 8 |
| Plant and machinery | 2 to 20 | 15 to 25 |
Based on technical evaluation and consequent advice, the management believes that its estimates of useful lives as given above best represents the period over which management expects to use these assets, which is different, in certain cases, from the useful lives as prescribed under Part C of Schedule II of the Companies Act, 2013.
Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted, if appropriate.
Depreciation on additions/(disposals) is provided on a pro-rata basis i.e. from/ (up to) the date on which asset is ready for use/ (disposed off).
Goodwill and other Intangible assets
Recognition and measurement
Goodwill
Goodwill is initially recognised based on the accounting policy for business combinations and is tested for impairment annually.
Other intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is recognised at fair value at the date of acquisition. An intangible asset is recognised only if it is probable that future economic benefits attributable to the asset will flow to the Company and the cost of the asset can be measured reliably. Following initial recognition, other intangible assets, including those acquired by the Company in a business combination and have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses.
Intangible assets are amortised over their respective individual estimated useful lives on a straight-line basis, commencing from the date the asset is available to the Group for its use and is included in depreciation and amortisation expense in Consolidated statement of profit and loss. Amortisation method, useful lives and residual values are reviewed at each financial year-end and adjusted, if appropriate.
Right to use "Ola" trade name has an indefinite life. Management evaluates annually whether the business circumstances continue to support an indefinite useful life assessment for assets so classified. Based on such review, useful life assessment may change from indefinite to finite. The impact of such changes is accounted for as a change in accounting estimate. Right to use Ola trade name acquired is initially recognised at cost and is subsequently carried at cost less accumulated impairment losses.
Internally generated intangible assets and Intangible assets under development
Expenditure on research activities is recognised in the Restated Consolidated statement of profit or loss as incurred.
Development expenditure is capitalised as part of cost of resulting intangible asset only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to and has sufficient resources to complete development and intends to use or sell the asset. Otherwise, it is recognised in the Restated Consolidated statement of profit and loss as incurred. The cost capitalised includes cost of material, employee cost and directly attributable overhead expenditure incurred up to the date asset is available to use. Subsequent to initial recognition, the internally generated intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses. Intangible assets under development are tested for impairment annually irrespective of whether there is any indication of impairment..
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates and the cost of the asset can be measured reliably. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.
Amortisation
Other intangible assets are amortised over their respective individual estimated useful lives on a straight-line basis, from the date that they are available for use. The estimated useful life of an identifiable intangible asset is based on a number of factors including the effects of obsolescence, demand, competition, and other economic factors (such as the stability of the industry, and known technological advances), and the level of maintenance expenditures required to obtain the expected future cash flows from the asset.
The management estimates the useful lives for its assets as follows:
Class of assets |
Useful life estimated (years) |
Product development (Internally generated) |
5 years |
Computer software |
3 years |
Domain name |
10 years |
Goodwill |
Indefinite Life |
Ola brand (Trade name) |
Indefinite Life |
The amortisation period and the amortisation method for finite-life intangible assets is reviewed at each financial year end and adjusted prospectively, if appropriate.
For indefinite life intangible assets, the assessment of indefinite life is reviewed annually to determine whether it continues, if not, it is impaired or changed prospectively basis revised estimates.
Revenue recognition
Revenue is recognised upon transfer of control of promised products or services to customers for an amount that reflects the consideration which the Group expects to receive in exchange for those products or services. Revenue excludes taxes or duties collected on behalf of the government. In relation to revenue from contracts with customers, amounts are generally collected in advance.
Revenue from sale of products are recognised when control of goods are transferred to the buyer which is generally on delivery for domestic sales and on delivery on local port in India for export sales; as per the terms of sale, i.e.; at a point in time.
Service income which primarily consists of performance upgrade are recognized as per the terms of the contract on satisfaction of performance obligation which is generally on customer acknowledgement on delivery of upgrades, i.e.; at a point in time.
Warranty considerations as a service
Vehicles and parts sold by the Group include a standard warranty to guarantee the vehicle complies with agreed-upon specifications for a defined period of time. Where the warranty offering to the end customer exceeds the standard market expectation for similar products or provides a service in excess of the assurance that the agreed-upon specification is met, the Group considers this to constitute a service to the end customer and therefore a separate performance obligation. Revenue is recognised on a straight-line basis over the contractual period to which the warranty service relates, up to which point it is recognised as a contract liability. Revenue is measured based on the transaction price, which is the consideration, net of discounts and price concessions as specified in the contract with the customer. Revenues are recognised when collectability of the resulting receivables is reasonably assured. A liability is recognised where payments are received from customers before transferring control of the goods being sold or providing services to the customer. The Group disaggregates revenue from contracts with customers by nature of goods and services.
Contract liabilities
A contract liability is the obligation to transfer goods to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made, or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract. Billing in excess of revenue is disclosed as Unearned revenue in other liabilities (current).
Other operating revenue
Other operating revenue which primarily consists of vendor handling charges and subscription income are recognized as per the terms of the contract on satisfaction of performance obligation.
Provision and contingent liabilities
A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that is that can be estimated, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.
A provision for onerous contracts is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract, which is determined based on the incremental costs of fulfilling the obligation under the contract and an allocation of other costs directly related to fulfilling the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract.
Provisions for warranty-related costs are recognised when the product is sold to the customer. Initial recognition is based on management estimate of product failure rates. The initial estimate of warranty-related costs is revised annually.
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non- occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably.
Contingent assets are not recognised or disclosed in financial statements since this may result in the recognition of income that may never be realised.
Inventories
Inventories are valued at the lower of cost and net realizable value.
Cost of raw materials, finished goods, stores & spares, components, consumables and traded goods are ascertained on a weighted average basis. Goods-in-transit are recorded at actual cost. Cost, including fixed and variable production overheads, are allocated to work-in-progress and finished goods determined on a full absorption cost basis.
Provision for obsolescence is made wherever necessary.
Net realisable value is the estimated selling price in the ordinary course of business less estimated cost of completion and selling expenses. Materials and other supplies held for use in the production are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when a decline in the price of materials indicate that the cost of the finished products exceeds net realisable value, the materials are written down to net realisable value. The replacement cost of materials at the year end has been considered as the best available measure of their net realisable value.
Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to revenue, it is recognised in the Statement of Profit and Loss on a systematic basis over the periods to which it relates. When the grant relates to an asset, it is treated as deferred income and recognised in the Statement of Profit and Loss as other income on a systematic basis over the useful life of the asset.
Grants that compensate the Group for expenses incurred are recognised in profit or loss as reduction to expense on a systematic basis in the periods in which the expenses are recognised, unless the conditions for receiving the grant are met after the related expenses have been recognised.
Employee Benefits
Short-term employee benefits
Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term employee benefits. These benefits include salaries and wages, bonus, compensated absences and ex-gratia. Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid e.g., under short-term cash bonus, if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the amount of obligation can be estimated reliably.
Post employment benefit
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. The Group makes specified monthly contributions towards Government administered provident fund scheme and employee state insurance scheme. Obligations for contributions to defined contribution plans are recognised as an employee benefits expense in statement of profit and loss in the periods during which the related services are rendered by employees.
Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Groups net obligation in respect of defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in the current and prior periods and discounting that amount. The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit method. Re-measurements of the net defined benefit liability, which comprise actuarial gains and losses are recognised in other comprehensive income (OCI). The Group determines the net interest expense on the net defined benefit liability for the period/ year by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability, taking into account any changes in the net defined benefit liability during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in statement of profit and loss.
Other long term employee benefits- compensated absences
Accumulated absences expected to be carried forward beyond twelve months is treated as long-term employee benefit for measurement purposes. The Groups net obligation in respect of other long-term employee benefit of accumulating compensated absences is the amount of future benefit that employees have accumulated at the end of the period/ year. That benefit is discounted to determine its present value. The obligation is measured annually by a qualified actuary using the projected unit credit method. Remeasurements are recognised in profit or loss in the period in which they arise. The obligations are presented as current liabilities in the balance sheet if the Group does not have an unconditional right to defer the settlement for at least twelve months after the reporting date.
Share-based payment transactions
The cost of equity-settled transactions is determined by the fair value at the date when the grants are made using an Black Scholes model. The cost is recognised in employee benefits expense, together with a corresponding increase in share options outstanding account in equity, over the period in which the performance and/or service conditions are fulfilled in a graded vesting manner. The amount recognised as expense is based on the estimate of the number of awards for which the related service are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service conditions at the vesting date.
SUMMARY RESULTS OF OPERATIONS
The following table sets forth select financial data from our restated consolidated statement of profit and loss for Fiscals 2024, 2023 and 2022 the components which are also expressed as a percentage of total income for such periods.
| Fiscal | ||||||
Particulars |
2024 | 2023 | 2022 | |||
| Amount (in million) | % of Total income | Amount (in million) | % of Total income | Amount (in million) | % of Total income | |
| Revenue from operations | 50,098.31 | 95.55 | 26,309.27 | 94.55 | 3,734.23 | 81.84 |
| Other income | 2,334.39 | 4.45 | 1,517.70 | 5.45 | 828.37 | 18.16 |
Total income |
52,432.70 | 100.00 | 27,826.97 | 100.00 | 4,562.60 | 100.00 |
Expenses |
||||||
| Cost of materials consumed | 43,909.05 | 83.74 | 25,047.92 | 90.01 | 5,849.34 | 128.20 |
| Purchase of stock-in- trade | 697.54 | 1.33 | 1,392.61 | 5.00 | 561.81 | 12.31 |
| Change in inventories of finished goods, stock-in trade and work-in-progress | (811.35) | (1.55) | (736.44) | (2.65) | (1,602.15) | (35.11) |
| Employee benefits expense | 4,388.68 | 8.37 | 4,267.25 | 15.33 | 2,824.80 | 61.91 |
| Other expenses | 14,590.19 | 27.83 | 8,862.41 | 31.85 | 4,104.32 | 89.96 |
Total expenses |
62,774.11 | 119.72 | 38,833.75 | 139.55 | 11,738.12 | 257.27 |
Loss before finance costs, depreciation, amortization and tax expense |
(10,341.41) | (19.72) | (11,006.78) | (39.55) | (7,175.52) | (157.27) |
| Finance costs | 1,865.67 | 3.56 | 1,079.17 | 3.88 | 176.18 | 3.86 |
| Depreciation and amortization expense | 3,576.42 | 6.82 | 1,670.64 | 6.00 | 489.80 | 10.74 |
Loss before exceptional items and tax |
(15,783.50) | (30.10) | (13,756.59) | (49.44) | (7,841.50) | (171.86) |
| Exceptional items | 60.50 | 0.12 | 964.20 | 3.46 | - | - |
Loss before tax |
(15,844.00) | (30.22) | (14,720.79) | (52.90) | (7,841.50) | (171.86) |
Tax expense |
||||||
| Current tax | - | - | - | - | - | - |
| Deferred tax | - | - | - | - | - | - |
Total tax expense |
- | - | - | - | - | - |
Loss for the year |
(15,844.00) | (30.22) | (14,720.79) | (52.90) | (7,841.50) | (171.86) |
Fiscal 2024 compared to Fiscal 2023
Revenue from operations
Our revenue from operations increased to 50,098.31 million in Fiscal 2024 from 26,309.27 million in Fiscal 2023 primarily due to increased sales of the Ola S1 and Ola S1 Pro scooters and the commencement of deliveries of the Ola S1 Air and Ola S1 X+ in Fiscal 2024. In Fiscal 2024, we sold 329,618 scooters, comprising 192,029 units of the Ola S1 Pro, 9,409 units of the Ola S1, 74,535 units of the Ola S1 Air and 53,645 units of the Ola S1 X+, compared to 156,251 scooters sold in Fiscal 2023, comprising 98,199 units of the Ola S1 Pro and 58,052 units of the Ola S1.
We also had other operating revenue of 2,118.57 million in Fiscal 2024, primarily from vendor handling charges, sale of scraps and subscription income, as compared to 304.51 million in Fiscal 2023. Our vendor handling charges increased to 885.00 million from 264.42 million as we delivered more EVs to customers.
Other income
Our other income increased to 2,334.39 million in Fiscal 2024 from 1,517.70 million in Fiscal 2023, mainly due to an increase in distribution fees and lending commission received from OFSPL and due to an increase in government incentives in Fiscal 2024 as compared to Fiscal 2023 due to the recognition of incentives under the Automobile PLI Scheme in Fiscal 2024. We understand that increase in distribution fees and lending commission is on account of increase in sales of insurance policies to our customers and financing agreements to fund our customers EV purchases in OFSPL, which was facilitated by us.
Expenses
Our total expenses increased to 62,774.11 million in Fiscal 2024 from 38,833.75 million in Fiscal 2023 primarily due to an increase in cost of materials consumed in the production of our scooters and other expenses, in line with the growth in sales of our scooters. Our total expenses as a percentage of total income were 119.72% in the Fiscal 2024 as compared to 139.55% in the Fiscal 2023.
Cost of materials consumed
Our cost of materials consumed increased to 43,909.05 million in Fiscal 2024 from 25,047.92 million in Fiscal 2023, in line with the increase in the production and sale of our scooters. The cost of materials consumed reflects the cost of raw materials used in the production of our scooters, and represented 83.74% and 90.01% of our total income in Fiscals 2024 and 2023, respectively.
Purchase of stock-in-trade
Our purchase of stock-in-trade decreased to 697.54 million in Fiscal 2024 from 1,392.61 million in Fiscal 2023, because OET ceased purchasing spares on behalf of OFT following the transfer of experience centres from OFT to OET on July 1, 2023.
Change in inventories of finished goods, stock-in trade and work-in-progress
Closing inventories levels of work-in progress, finished goods, spare parts, stock in trade increased to 3,182.16 million as at March 31, 2024 from 2,370.81 million as at March 31, 2023 due to growth of our business. As a result, change in inventories of finished goods, stock-in trade and work-in-progress was 811.35 million in Fiscal 2024 as compared to 736.44 million in Fiscal 2023.
Employee benefits expenses
Our employee benefits expenses increased to 4,388.68 million in Fiscal 2024 from 4,267.25 million in Fiscal 2023 primarily due to an increase in the size of our workforce to support the growth in sales of our scooter and an increase in the salaries paid to our employees, in addition to the share options granted to certain of our employees.
Other expenses
Our other expenses increased to 14,590.19 million in Fiscal 2024 from 8,862.41 million in Fiscal 2023 due to an increase in the warranties, manpower supply charges and freight and forwarding charges, attributable to the increase in sale of scooters.
Finance Costs
Our finance costs on a consolidated basis increased to 1,865.67 million in Fiscal 2024 from 1,079.17 million in Fiscal 2023 primarily due to an increase in interest on borrowings.
Depreciation and amortisation expense
Our depreciation and amortisation expense increased to 3,576.42 million in Fiscal 2024 from 1,670.64 million in Fiscal 2023. This increase in depreciation and amortisation expense is due to additional investments in property, plant and equipment, intangible assets, depreciation on right of use assets related to the expansion of our experience centres.
Exceptional items
We recognised exceptional items amounting to 60.50 million in Fiscal 2024, arising from our decision to fully refund customers who purchased Ola S1 Pro scooters prior to March 31, 2023, the cost of the chargers they had purchased together with the Ola S1 Pro scooter prior to March 31, 2023. As at March 31, 2024, we have processed refunds to more than 90% of eligible customers.
Loss for the year
As a result of the foregoing factors, our loss for the year increased to 15,844.00 million in Fiscal 2024 from a loss of 14,720.79 million in Fiscal 2023.
Fiscal 2023 compared to Fiscal 2022
We commenced delivery of our first scooter, Ola S1 Pro, in December 2021. Our revenue from operations in Fiscal 2022 was recognised only from December 2021 to March 31, 2023 compared to the full year in Fiscal 2023. Accordingly, our results of operations for Fiscal 2022 are not strictly comparable to Fiscal 2023.
Revenue from operations
Our revenue from operations increased to 26,309.27 million in Fiscal 2023 from 3,734.23 million in Fiscal 2022 primarily due to an increase in the sale of the Ola S1 Pro scooters and commencement of sale of Ola S1 scooters in September 2022, spare parts and chargers and the sale of services relating to performance upgrades. In Fiscal 2023, we sold 156,251 scooters, comprising 98,199 units and 58,052 units of Ola S1 Pro and Ola S1, respectively, compared to 20,948 and nil units in Fiscal 2022, respectively. We experienced higher demand for our EVs and higher sales volumes, partly owing to the FAME subsidy available to our customers which helped to lower the cost of ownership of our products.
Other income
Our other income increased to 1,517.70 million in Fiscal 2023 from 828.37 million in Fiscal 2022 primarily due to an increase in interest income on bank deposits to 920.36 million in Fiscal 2023 from 578.52 million in Fiscal 2022. Pursuant to an MOU between OET and the Government of Tamil Nadu, the Government of Tamil Nadu awarded us a structured package of capital and revenue assistance to set up our EV hub in Tamil Nadu, subject to certain conditions, which is to be granted over time. In Fiscal 2023, we became eligible for the capital and revenue assistance pursuant to the terms of the MOU.
As such, OET recognised government incentives in the amount of 204.64 million in Fiscal 2023, and interest income on such financial asset (government grant) of 69.20 million for the same period.
Expenses
Our total expenses increased to 38,833.75 million in Fiscal 2023 from 11,738.12 million in Fiscal 2022 primarily due to an increase in cost of materials consumed in the production of our scooters, employee benefits expenses, purchase of stock-in-trade and other expenses, in line with the growth in sales of our scooters. As a percentage of total income, our total expenses was 139.55% in Fiscal 2023 compared to 257.27% in Fiscal 2022.
Cost of materials consumed
Our cost of materials consumed increased to 25,047.92 million in Fiscal 2023 from 5,849.34 million in Fiscal 2022 in line with the increase in the production and sale of our scooters. The cost of materials consumed reflects the cost of raw materials used in the production of our scooters, and represented 90.01% and 128.20% of our total income for Fiscals 2023 and 2022, respectively.
Purchase of stock-in-trade
Our purchase of stock-in-trade increased to 1,392.61 million in Fiscal 2023 from 561.81 million in Fiscal 2022 due to an increase in our purchase of spare parts, chargers and wall-mounts to support the growth of our business.
Change in inventories of finished goods, stock-in trade and work-in-progress
Closing stock levels of work-in progress, finished goods, spare parts, stock in trade increased to 2,370.81 million in Fiscal 2023 from 1,634.39 million in Fiscal 2022 due to growth of our business. As a result, change in inventories of finished goods, stock-in trade and work-in-progress changed to a decrease of expense of 736.44 million in Fiscal 2023 from a decrease of 1,602.15 million in Fiscal 2022.
Employee benefits expense
Our employee benefits expense increased to 4,267.25 million in Fiscal 2023 from 2,824.80 million in Fiscal 2022 due to an increase in the size of our workforce to support the growth in sales of our scooter and an increase in the salaries paid to our employees, in addition to the share options granted to certain of our employees. In relation to the granting of equity stock options to our employees, we recognised equity settled share based payments of 1,100.52 million in Fiscal 2023, an increase from 195.37 million in Fiscal 2022.
Other expenses
Our other expenses increased to 8,862.41 million in Fiscal 2023 from 4,104.32 million in Fiscal 2022 due to an increase in the provision for warranties, selling and distribution expenses and vehicle repair services, attributable to the increase in sale of scooters. We also recognised an increase in research costs to 860.82 million in Fiscal 2023 from 156.90 million in Fiscal 2022 as we continued to invest in R&D and grow our business.
Finance Costs
Our finance costs increased to 1,079.17 million in Fiscal 2023 from 176.18 million in Fiscal 2022 due to an increase in borrowings from financial institutions to finance our business operations.
Depreciation and amortisation expense
Our depreciation and amortisation expense increased to 1,670.64 million in Fiscal 2023 from 489.80 million in Fiscal 2022. The increase in depreciation and amortisation expense aligns with the ramp-up of our business operations and revenue as we commenced delivery of our first scooter in December 2021 and were in operation for the full year in Fiscal 2023.
Exceptional items
We recognised exceptional items amounting to 964.20 million in Fiscal 2023 arising from our decision to fully refund customers who purchased Ola S1 Pro scooters prior to March 31, 2023, the cost of the chargers they had purchased together with the Ola S1 Pro scooter. As at March 31, 2024, we have processed refunds to more than 90% of eligible customers.
Loss for the year
As a result of the foregoing factors, our loss for the year increased to 14,720.79 million in Fiscal 2023 from a loss of 7,841.50 million in Fiscal 2022.
Key Performance Indicators
In evaluating our business, we consider and use certain KPIs, as presented below, as a supplemental measure to review and assess our financial and operating performance. The presentation of these KPIs is not intended to be considered in isolation or as a substitute for the Restated Consolidated Financial Information. We present these KPIs because we use them to evaluate our financial and operating performance. These KPIs have limitations as analytical tools. Further, these KPIs may differ from the similar information used by other companies, including peer companies, and hence their comparability may be limited. Although these KPIs are not a measure of performance calculated in accordance with applicable accounting standards, our Companys management believes that they provide an additional tool for investors to use in evaluating our ongoing operating results and trends and in comparing our financial results with other companies in our industry because they provide consistency and comparability with past financial performance, when taken collectively with financial measures prepared in accordance with Ind AS.
| Fiscal | |||
Particulars |
2024 | 2023 | 2022 |
| (in million, except as indicated otherwise) | |||
Deliveries (in thousands) |
330 | 156 | 21 |
| Revenue from operations | 50,098.31 | 26,309.27 | 3,734.23 |
| Adjusted gross margin %(1)* | 16.47% | 7.63% | (5.40)% |
(1) As the Company did not have any sale of finished and traded goods in Fiscal 2021, the presentation of the relevant KPIs is not applicable for such period.
* Adjusted Gross Margin is computed by deducting cost of materials consumed, purchase of stock-in-trade and change in inventories of finished goods, stock-in-trade and work-in-progress (excluding certain other direct expenses such as employee benefit expenses and other expenses) from total income. Adjusted Gross Margin % is defined as Adjusted Gross Margin for the relevant period divided by total income for such period. For reconciliation of Non GAAP measures, see " Non GAAP Measures" on page 347
Non-GAAP Measures
Certain non-GAAP financial measures relating to our financial performance, namely Net Worth, Return on Net Worth, Net Asset Value per Equity Share, EBITDA, EBITDA Margin %, Gross Margin, Gross Margin %, Adjusted Gross Margin and Adjusted Gross Margin % have been included in this Red Herring Prospectus and are a supplemental measure of our performance and liquidity that are not required by, or presented in accordance with, Ind AS, IFRS or US GAAP. These non-GAAP financial measures and other information relating to financial performance may not be computed on the basis of any standard methodology that is applicable across the industry and, therefore a comparison of similarly titled non-GAAP measures or other information relating to operations and financial performance between companies may not be possible. Other companies may calculate these non-GAAP measures differently from us, limiting their usefulness as a comparative measure. The principal limitation of these non-GAAP measures is that they exclude significant expenses that are required by Ind AS to be recorded in our financial statements, as further detailed below. A reconciliation is provided below for each non-GAAP measure to the most directly comparable GAAP measure. Investors are encouraged to review the related GAAP measures and the reconciliation of non-GAAP measures to their most directly comparable GAAP measure included below and to not rely on any single financial measure to evaluate our business.
Investors are encouraged to review the related Ind AS financial measures and the reconciliation of the non-GAAP measures to their most directly comparable Ind AS financial measures and to not rely on any single financial measure to evaluate our business. See "Risk Factors Significant differences exist between Indian accounting standard ("Ind AS") and other accounting principles, such as international financial reporting standards ("IFRS") and United States generally accepted accounting principles ("US GAAP"), which may be material to investors assessments of our financial condition." on page 74.
| Fiscal | |||
Particulars |
2024 | 2023 | 2022 |
| (in million, except as indicated otherwise) | |||
| Other income | 2,334.39 | 1,517.70 | 828.37 |
| Total income | 52,432.70 | 27,826.97 | 4,562.60 |
| Loss before tax | (15,844.00) | (14,720.79) | (7,841.50) |
| Loss before tax %(1) | (30.22)% | (52.90)% | (171.86)% |
| Adjusted gross margin(2) | 8,637.46 | 2,122.88 | (246.40) |
| EBITDA(3) | (10,401.91) | (11,970.98) | (7,175.52) |
| EBITDA margin %(3) | (19.84)% | (43.02)% | (157.27)% |
| Notes: | |||
Notes:
(1) Loss before tax % is defined as profit/loss before tax divided by total income.
(2) Adjusted Gross Margin is a non-GAAP measure. We define Adjusted Gross Margin is computed by deducting cost of materials consumed, purchase of stock-in-trade and change in inventories of finished goods, stock-in-trade and work-in-progress (excluding certain other direct expenses such as employee benefit expenses and other expenses) from total income. Adjusted Gross Margin % is defined as Adjusted Gross Margin divided by total income.
(3) Earnings before interest, taxes, depreciation and amortisation, or EBITDA, is a non-GAAP measure which represents loss for the year, before tax expenses, finance costs and depreciation and amortisation expenses. EBITDA Margin % is defined as EBITDA divided by total income.
The following table reconciles Adjusted Gross Margin to total income for the periods presented:
| Fiscal | |||
Particulars |
2024 | 2023 | 2022 |
| (in million, except as indicated otherwise) | |||
| Total income (A) | 52,432.70 | 27,826.97 | 4,562.60 |
| Minus: cost of materials consumed (B) | 43,909.05 | 25,047.92 | 5,849.34 |
| Minus: purchase of stock-in-trade (C) | 697.54 | 1,392.61 | 561.81 |
| Minus: change in inventories of finished goods, stock-in trade and work-in-progress(D) | (811.35) | (736.44) | (1,602.15) |
| Adjusted gross margin (E) (E=A-B-C-D) | 8,637.46 | 2,122.88 | (246.40) |
| Adjusted gross margin % (F) (F=E/A) | 16.47% | 7.63% | (5.40)% |
The following table reconciles EBITDA to our loss for the years presented:
Particulars |
Fiscal | ||
| 2024 | 2023 | 2022 | |
| (in million, except as indicated otherwise) | |||
| Loss for the year (A) | (15,844.00) | (14,720.79) | (7,841.50) |
| Add: Tax expense (B) | - | - | - |
Particulars |
Fiscal | ||
| 2024 | 2023 | 2022 | |
| (in million, except as indicated otherwise) | |||
| Add: Finance costs (C) | 1,865.67 | 1,079.17 | 176.18 |
| Add: Depreciation and | 3,576.42 | 1,670.64 | 489.80 |
| amortization expense (D) | |||
EBITDA (E) (E=A+B+C+D) |
(10,401.91) | (11,970.98) | (7,175.52) |
| Total income (F) | 52,432.70 | 27,826.97 | 4,562.60 |
EBITDA Margin %(G) |
(19.84)% | (43.02)% | (157.27)% |
(G=E/F) |
The following table reconciles Gross Margin to our revenue from operations for the years presented:
Particulars |
Fiscal | ||
| 2024 | 2023 | 2022 | |
| (in million, except as indicated otherwise) | |||
| Revenue from operations (A) | 50,098.31 | 26,309.27 | 3,734.23 |
| Minus: Cost of materials consumed (B) | 43,909.05 | 25,047.92 | 5,849.34 |
| Minus: Purchase of stock-in- trade (C) | 697.54 | 1,392.61 | 561.81 |
| Minus: Change in inventories of finished goods, stock in trade and work in progress (D) | (811.35) | (736.44) | (1,602.15) |
Gross Margin (E) (E= A-B-C- |
6,303.07 | 605.18 | (1,074.77) |
D) |
|||
Gross Margin % (F) (F=E/A) |
12.58% | 2.30% | (28.78%) |
Selected Restated Consolidated Statement of Assets and Liabilities
The table below sets forth the principal components of our total assets, equity and liabilities as at the periods indicated in the table below:
| Particulars | As of March 31, 2024 | As of March 31, 2023 | As of March 31, 2022 |
| (in million) | |||
| Total non-current assets | 36,888.00 | 21,235.35 | 13,323.32 |
| Total current assets | 40,466.09 | 34,496.34 | 40,635.31 |
| Total assets | 77,354.09 | 55,731.69 | 53,958.63 |
| Total equity | 20,193.39 | 23,564.44 | 36,614.52 |
| Total non-current liabilities | 17,081.84 | 8,658.21 | 5,779.00 |
| Total current liabilities | 40,078.86 | 23,509.04 | 11,565.11 |
| Total liabilities | 57,160.70 | 32,167.25 | 17,344.11 |
| Total equity and liabilities | 77,354.09 | 55,731.69 | 53,958.63 |
Our total non-current assets were 13,323.32 million as at March 31, 2022, increasing by 59.38% to 21,235.35 million as at March 31, 2023 and further increasing by 73.71% to 36,888.00 million as at March 31, 2024. The increase in our non-current assets was primarily due to increase in our investments made in manufacturing facilities and development expenditure incurred on internally generated intangible assets, namely
(i) property, plant and equipment,
(ii) capital work-in-progress,
(iii) other intangible assets and
(iv) intangible assets under development, and an increase in right of use assets arising from new lease agreements entered into in relation to the expansion of our experience centres.
Our total current assets were 40,635.31 million as at March 31, 2022, decreasing by 15.11% to 34,496.34 million as at March 31, 2023 and increasing by 17.31% to 40,466.09 million as at March 31, 2024. The decrease as at March 31, 2023 was primarily due to reduction in cash and cash equivalents which were used for business operations while the increase as at March 31, 2024 was primarily due to receivables from Government authorities and Government incentives.
Our total equity decreased from 36,614.52 million as at March 31, 2022 to 23,564.44 million as at March 31, 2023 and to 20,193.39 million as at March 31, 2024, primarily due to loss for the year.
Our total non-current liabilities increased from 5,779.00 million as at March 31, 2022 to 8,658.21 million as at March 31, 2023 and closed at 17,081.84 million as at March 31, 2024. This increase was primarily due to the term loan availed for setting up of manufacturing facility, debentures taken to meet working capital requirements and lease liabilities related to experience centres.
Our total current liabilities increased from 11,565.11 million as at March 31, 2022 to 23,509.04 million as at March 31,
2023 and increased to 40,078.86 million as at March 31, 2024. The increase was primarily due to availing short term credit facilities to meet the working capital requirements and outstanding dues of creditors and payments to related parties.
Liquidity and Capital Resources
Historically, our primary liquidity requirements have been to finance our working capital needs for our operations and capital expenditures. We have met these requirements through cash flows from operations and borrowings and the issuance of compulsorily convertible preference shares. As at March 31, 2024, we had 1,071.14 million in cash and cash equivalents, 15,559.71 million as bank balances other than cash and cash equivalents, 13,186.00 million in non-current borrowings and 10,706.10 million in current borrowings. We believe that, after taking into account the expected cash to be generated from our operations, our borrowings and the proceeds from the Offer, we will have sufficient liquidity for our present requirements and anticipated requirements for capital expenditure and working capital for the next 12 months.
Cash Flows
The table below summarises the statement of cash flows, as per our restated consolidated cash flow statements, for the periods indicated:
| Fiscal | |||
| 2024 | 2023 | 2022 | |
| (in million) | |||
| Net cash used in operating activities | (6,330.87) | (15,072.71) | (8,849.54) |
| Net cash used in investing activities | (11,362.76) | (3,185.50) | (13,218.25) |
| Net cash generated from financing activities | 15,899.61 | 6,587.04 | 30,848.27 |
Net (decrease)/ increase in cash and cash equivalents |
(1,794.02) | (11,671.17) | 8,780.48 |
Operating Activities
Net cash used in operating activities for Fiscal 2024 was 6,330.87 million, while our operating loss before working capital changes was 10,756.08 million. The difference was primarily attributable to an increase in trade payables of 6,520.94 million, an increase in other liabilities and provisions of 3,335.76 million and an increase in other financial liabilities of 1,340.00 million. This was partially offset by an increase in other assets of 2,773.45 million, an increase in inventories of 927.00 million and an increase in other financial assets of 2,247.14 million.
Net cash used in operating activities for Fiscal 2023 was 15,072.71 million, while our operating loss before working capital changes was 12,027.57 million. The difference was primarily attributable to an increase in inventory of 2,996.70 million and other financial assets of 5,206.90 million due to growth of our business, which was partially offset by an increase in trade payables of 3,380.72 million and an increase in other financial liabilities of 2,789.22 million.
Net cash used in operating activities for Fiscal 2022 was 8,849.54 million, while our operating loss before working capital changes was 7,510.72 million. The difference was primarily attributable to an increase in inventory of 2,810.57 million and other assets of 5,518.43 million due to commencement of commercial production and sales of scooters in Fiscal 2022, which was partially offset by an increase in trade payables of 3,136.01 million and an increase in other liabilities and provisions of 3,911.69 million.
Investing Activities
Net cash used in investing activities for Fiscal 2024 was 11,362.76 million, and primarily included investment in interest bearing deposits of 34,741.48 million, development expenditure on internally generated intangible assets of 2,744.04 million and the acquisition of property, plant and equipment of 9,252.85 million. This was partially offset by proceeds from interest bearing deposits of 32,292.80 million and proceeds from sale of mutual fund units of 5,227.60 million.
Net cash used in investing activities for Fiscal 2023 was 3,185.50 million, and primarily included acquisition of property, plant and equipment of 4,336.03 million and acquisition of intangible assets of 59.78 million. This was partially offset by proceeds from interest bearing deposits of 34,120.44 million, interest received of 1,072.93 million and proceeds from sale of mutual fund units of 8,828.77 million.
Net cash used in investing activities for Fiscal 2022 was 13,218.25 million, and primarily included acquisition of property, plant and equipment of 7,635.70 million, purchase of mutual fund units of 23,456.89 million and acquisition of intangible assets of 133.80 million, partially offset by proceeds from interest bearing deposits of 104,865.63 million and interest received of 637.44 million.
Financing Activities
Net cash flow generated from financing activities for Fiscal 2024 was 15,899.61 million, and primarily included proceeds from issue of compulsorily convertible preference shares of 11,636.24 million, proceeds from issue of debentures (net of transaction costs) of 4,033.07 million and proceeds from non-current borrowings net of processing fee of 3,107.04 million.
This was partially offset by interest paid of 1,697.00 million and payment of lease liabilities (including interest) of 1,000.54 million.
Net cash flow generated from financing activities for Fiscal 2023 was 6,587.04 million, and primarily included proceeds from net current borrowings of 5,238.30 million and proceeds from non-current borrowings of 1,964.91 million. This was partially offset by interest paid of 1,083.50 million.
Net cash flow generated from financing activities for Fiscal 2022 was 30,848.27 million, and primarily included proceeds from the issue of compulsorily convertible preference shares of 24,725.21 million and proceeds from non-current borrowings of 5,237.90 million.
Indebtedness
As at March 31, 2024, we had total borrowings of 23,892.10 million which consisted of non-current borrowings and current borrowings. These loans were primarily used for setting up of manufacturing facilities and to meet the working capital requirements. For further information on our agreements governing our outstanding indebtedness, see "Financial Indebtedness" on page 354. The table below provides breakdown of our total borrowings as at the dates indicated:
| In Million | |||
Particulars |
As at March 31, 2024 | As at March 31, 2023 | As at March 31, 2022 |
| Non-current borrowings | 13,186.00 | 7,003.31 | 5,237.90 |
| Current borrowings | 10,706.10 | 9,454.22 | 2,266.17 |
Total borrowings |
23,892.10 | 16,457.53 | 7,504.07 |
Contractual Obligations |
The table below sets forth our contractual obligations as at March 31, 2024.
| In Million | ||||
Particulars |
Less than 1 year | 1 to 5 year | More than 5 years | Total |
| Loan from related party | 82.88 | - | - | 82.88 |
| Borrowings | 11,257.02 | 14,595.16 | 2,535.68 | 28,387.86 |
| Lease liabilities | 1,298.02 | 2,378.89 | 0.97 | 3,677.88 |
| Trade payables | 13,484.69 | - | - | 13,484.69 |
| Other financial liabilities | 8,888.85 | - | - | 8,888.85 |
Total |
35,011.46 | 16,974.05 | 2,536.65 | 54,522.16 |
Contingent Liabilities and Capital Commitments
The following table sets forth details of our contingent liabilities, capital commitments and guarantees as at March 31, 2024 as per the Restated Consolidated Financial Information. Our Company is not involved in any disputes and claims, including commercial matters, which arise from time to time in the ordinary course of business. For more details see "Outstanding Litigation and Material Developments" on page 357.
Particulars |
As at March 31, 2024 (in million) |
Contingent liabilities |
0.00 |
Capital commitments |
|
| Estimated amount remaining to be executed on account of capital contracts (Net of advances)(1) | 4,473.81 |
Guarantees |
|
| Ola Electric Technologies Private Limited(2) | 16,787.25 |
Particulars |
As at March 31, 2024 (in million) |
| Ola Cell Technologies Private Limited(3) | 3,295.00 |
Notes:
(1) The remaining balance required to be paid under pending purchase orders.
(2) Our Company has issued corporate guarantees, in favour of the banks / lenders on behalf of its subsidiary, Ola Electric Technologies Pvt Ltd, for the purposes of working capital and other general corporate purposes
(3) Our Company has issued corporate guarantees, in favour of the banks / lenders on behalf of its subsidiary, Ola Cell Technologies Pvt Ltd, for general corporate purposes.
Capital Expenditures
Our historical capital expenditures primarily included cash flow used in investing activities for the acquisition of property, plant and equipment, acquisition of intangible assets and development expenditure on internally generated intangible assets, which amounted to 12,139.13 million (comprising acquisition of property, plant and equipment of 9,252.85 million, acquisition of intangible assets of 142.24 million and development expenditure on internally generated intangible assets of 2,744.04 million), 8,426.12 million (comprising acquisition of property, plant and equipment of 4,336.03 million, acquisition of intangible assets of 59.78 million and development expenditure on internally generated intangible assets of 4,030.31 million) and 8,872.80 million (comprising acquisition of property, plant and equipment of 7,635.70 million, acquisition of intangible assets of 133.80 million and development expenditure on internally generated intangible assets of 1,103.30 million) in Fiscals 2024, 2023, 2022, respectively.
We expect our future capital expenditures to be primarily for (i) expansion of the installed capacity of our Ola Gigafactory from 5 GwH to 6.4 GwH, (ii) repayment or pre-payment, in full or in part, of OETs working capital borrowings, (iii) investment in research and product development, including investments in property, plant and equipment and intangible assets, (iv) organic growth initiatives and (v) general corporate purposes.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, derivative instruments or other relationships with other entities that would have been established for the purpose of facilitating off-balance sheet arrangements.
Related Party Transactions
We enter into various transactions with related parties. For further information, see "Restated Consolidated Financial Information Notes forming part of the Restated Consolidated Financial Information Note 35: Related Parties" on page 316.
Quantitative and Qualitative Disclosures about Market Risks
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three type of risks: currency rate risk, interest rate risk and other price risks, such as equity price risk and commodity price risk. Financial instruments affected by market risks include loans and borrowings, deposits, investments and foreign currency receivables and payables.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Our exposure to the risk of changes in market interest rates relates primarily to our borrowing with floating interest rates. As at March 31, 2024, all of our borrowings are subject to floating interest rates. We constantly monitor the credit markets and rebalances its financing strategies to achieve an optimal maturity profile and financing cost.
With all other variables held constant, our profit before tax will be impacted by a 1% change in interest rate as follows:
Sensitivity analysis on floating rate borrowings
Particulars |
Impact on profit or (loss) before tax (in million) | ||
| Year ended March 31, 2024 | Year ended March 31, 2023 | Year ended March 31, 2022 | |
| Increase in interest rate by 1% | (92.15) | (60.26) | (33.51) |
| Decrease in interest rate by 1% | 92.15 | 60.26 | 33.51 |
Foreign currency risk
We source certain components from suppliers based outside India and are exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the U.S Dollars, GBP and Euros. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not our functional currency. Our functional currency is the .
A 1% increase or decrease in the against the U.S. Dollar will increase or decrease, respectively, the cost of production of our scooters by 850.
Significant Economic Changes
Other than as described above under the heading titled "-Principal Factors Affecting Our Financial Condition and Results of Operations" on page 333 to the knowledge of our management, there are no other significant economic changes that materially affect or are likely to affect income from continuing operations.
Unusual or Infrequent Events of Transactions
Except as described in this Red Herring Prospectus, there have been no events or transactions that, to our knowledge, may be described as "unusual" or "infrequent".
Known Trends or Uncertainties
Our business has been affected and we expect will continue to be affected by the trends identified above in the heading titled
"-Principal Factors Affecting Our Financial Condition and Results of Operations" on page 333 and the uncertainties described in "Risk Factors" on page 29. To our knowledge, except as described or anticipated in this Red Herring Prospectus, there are no known factors which we expect will have a material adverse impact on our sales, revenues or income from continuing operations.
Seasonality of Business
Our orders are impacted by seasonality, corresponding with the seasonal fluctuation in demand for vehicles in the Indian automotive market which generally peaks between January and March each year and declines in February. Demand is generally lean between March and June and leaner between June and September due to the monsoon season, before picking up again during the festive season from September to November, followed by a decline in December as customers defer purchases to the following year. Such seasonal factors may also impact demand for our vehicles. See "Risk Factors Our results of operations may vary significantly from period to period due to the seasonality of our business and fluctuations in our operating costs." on page 65.
Significant Developments After March 31, 2024 that May Affect Our Future Results of Operations
On May 15, 2024 we allotted 10,000 non-convertible debentures with a face value of 100,000 each at a price of 100,000 each, amounting to 1,000.00 million, in a private placement pursuant to a debenture offer letter and debenture trust deed. The funds obtained from such issuance are expected to be used for general corporate purposes.
On June 29, 2024 the Company has made an allotment of 10,000 non-convertible debentures having face value of 100,000 each at a price of 100,000 each for an amount aggregating to INR 1,000.00 million on a private placement pursuant to debenture offer letter and debenture trust deed. The funds obtained from such issuance are expected to be used for general corporate purpose.
Except as discussed above and elsewhere in this Red Herring Prospectus, to our knowledge, no circumstances have arisen since the date of the Restated Consolidated Financial Information as disclosed in this Red Herring Prospectus which materially and adversely affect or are likely to affect our trading, operations or profitability, or the value of our assets or our ability to pay our liabilities within the next 12 months.
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