Ola Electric revs up for IPO: First pure-play EV maker gears up for public markets

29 Dec 2023 , 12:14 PM

Ola Electric, the electric vehicle (EV) manufacturer that commenced operations in December 2021, submitted its draft red herring prospectus (DRHP) to the Securities Exchange Board of India (SEBI) on December 22, signaling its entry into the public markets. As the first pure-play EV maker to make this move, the IPO is highly anticipated. The DRHP serves as a crucial document, providing investors with insights into the company’s financial metrics, growth strategies, and internal and external risk factors. Here are seven key highlights from Ola Electric’s DRHP:

1. IPO Details:
   • The IPO comprises a fresh issue of Rs 5,500 crore and an offer for sale (OFS) of Rs 1,750 crore, totaling Rs 7,250 crore.
   • Existing shareholders will sell 95.19 million shares in the OFS.
   • Founder Bhavish Aggarwal plans to sell 47.3 million shares, and initial investors such as AlphaWave, Alpine, DIG Investment, Matrix, and others will collectively sell 47.89 million shares through the OFS.
   • The company is also exploring a re-IPO placement of shares worth Rs 1,100 crore.
2. Utilization of Funds:
   • The funds raised will be allocated to capital expenditure (Rs 1,226 crore), debt repayment (Rs 800 crore), research and development (Rs 1,600 crore), and inorganic growth (Rs 350 crore).
   • R&D is a significant expense for Ola Electric, reflecting its commitment to innovation.
3. Internal Risk Factors:
   • Heavy investment in R&D is highlighted as a potential risk, with no guaranteed returns on such investments.
   • Reduction or elimination of government incentives, such as the Faster Adoption and Manufacturing of Electric Vehicles (FAME) subsidy, is identified as a risk affecting customer demand.
4. Board Composition and Remuneration:
   • The board comprises six directors, including one executive director, two non-executive directors, and three independent directors.
   • Bhavish Aggarwal will serve as Chairman and Managing Director.
   • The remuneration of Aggarwal and other directors is outlined, with Aggarwal receiving a base salary of Rs 6 crore per annum and variable pay of Rs 3 crore per annum.
5. Pending Litigation:
   • Bhavish Aggarwal has received summons from the Enforcement Directorate related to a complaint of copyright infringement. The matter has been settled as per a dated agreement.
   • As of December 2023, Ola Electric faces around 189 pending legal proceedings, totaling Rs 4 crore, before various consumer dispute redressal commissions.
6. Financial Metrics:
   • Consolidated revenues for the financial year ended March 2023 reached Rs 2,782 crore, with a net loss of Rs 1,472 crore.
   • Operating losses stood at Rs 1,197 crore in FY22-23.
   • Ola Electric reported a net worth of Rs 2,111 crore as of June 30, 2023.
7. Growth Roadmap:
   • Ola Electric is working on building its cell manufacturing gigafactory, with funds from the IPO allocated for expansion.
   • The company is constructing an EV hub in Tamil Nadu, comprising the Ola Future Factory, the gigafactory, and co-located suppliers.
   • Deliveries of Ola S1 X e-scooter and new motorcycle models are expected in fiscal years 2024-25 and 2025-26, respectively.