Ola Electric IPO Anchored with ₹2,763 Crore

2 Aug 2024 , 09:38 AM

Ola Electric, India’s leading electric two-wheeler (e2W) manufacturer, has taken a significant step towards its much-anticipated IPO by allotting 364 million shares to anchor investors. This allotment, made on Thursday, raised ₹2,763 Crore at ₹76 per share, the upper limit of its price band.

Details of the IPO

The ₹6,146 Crore IPO, the largest since the ₹21,000 Crore IPO of LIC in May 2022, will be open for subscription from Friday to Tuesday. The anchor allotment attracted over 80 domestic and international funds, demonstrating strong investor confidence.

Anchor Allotment Breakdown

Domestic mutual funds were allotted ₹1,117 Crore worth of shares. Notable participants included SBI MF, HDFC MF, Nippon MF, and UTI MF. Foreign funds that received allotments included Templeton Global, Nomura, Amundi, Jupiter Global, and Goldman Sachs. Investment bankers reported that demand in the anchor book surpassed the available shares, a positive signal for other potential IPO investors. Notably, 60% of the shares reserved for institutional investors in the IPO can be allotted under the anchor book.

IPO Pricing and Valuation

Ola has set a price band of ₹72-76 per share for its IPO. At the top end of this range, the company will be valued at ₹33,522 Crore ($4 billion) on a post-diluted basis. The IPO aims to raise ₹5,500 Crore through the issuance of fresh shares, which will be used to repay debt, expand Ola’s gigafactory, and fund research and development.

Offer for Sale (OFS) Details

The Offer for Sale (OFS) portion of the IPO totals ₹646 Crore, with founder Bhavish Aggarwal’s share amounting to ₹288 Crore. Other investors, including Tiger Global and Softbank, are selling stakes worth ₹48 Crore and ₹181 Crore, respectively. Alpine Opportunity and Tekne Private are offloading small quantities at a loss, given their acquisition cost was over ₹111 per share. Post-IPO, the promoter shareholding in Ola will reduce from nearly 45% to 36.78%.

Financial Performance and Market Position

Despite reporting a net loss in FY24 and being loss-making at the operating profit level, Ola has improved its free cash flow loss margin to -31% in FY24. However, due to ongoing cash burn, the company transitioned from a net cash positive position in FY22 to net debt in FY24.

Industry Outlook

Ola’s early entry into the electric two-wheeler market positions it ahead of the competition. With approximately 3.3 lakh deliveries in FY24, the company holds a 35% market share. According to Redseer, e2W penetration in India is expected to increase significantly, from around 5.4% of domestic two-wheeler registrations in FY24 to 41-56% of sales volume by FY28. The Indian e2W industry is projected to grow at a CAGR of 11%, reaching a market size of $45 billion (Rs 3.6 trillion) by FY28.