Ola commanded 48% share in the electric two-wheeler (e2W) segment in the June 2024 quarter. However, it continued to report losses at the operating level in FY24. In addition, the EV growth in the country heavily depends on government subsidies, which have been gradually decreasing at a time when value-conscious buyers are still concerned about the mileage range offered by EV models. Given these factors, high-risk investors wanting an exposure to the EV opportunity may consider investing in the company's IPO.
Business
Founded in 2017, Bengaluru-based Ola manufactures e2Ws and certain EV components. The company is developing an EV hub in Krishnagiri and Dharmapuri districts in Tamil Nadu, which includes the Ola Futurefactory, the largest automated e2W manufacturing plant in India in terms of production capacity of one million units per year at the end of FY24. The company operates one of the few cell factories in India with a commissioned capacity of 1.6 gigawatt hour (GWh), which is expected to ramp up to 20 GWh by the second quarter of 2026. Ola operates through a direct-to-customer omnichannel distribution network across India, including 870 experience centers and 431 service centers.
The company is working on developing its own battery chemistry to achieve higher energy density, which would reduce battery costs and provide greater control over battery quality, supply, and cost, thereby lowering its bill of materials.
Financials
Revenue grew to INR 5,009 crore in FY24 compared with INR 373 crore in FY22, as the company's volume increased to 330,000 units from 21,000 units during the period. The gross margin was 12.6% in FY24 while it reported a loss at the gross level in FY22. The operating loss (EBITDA loss) was INR 1,040 crore and net loss was INR 1,584 crore in FY24. The cumulative net loss over the past three fiscal years was INR 3,840 crore.
Risks
Any rollback or cessation of government subsidies and incentives could impact the volume growth. State governments have been levying minimal to lower registration taxes to reduce the final acquisition cost for buyers. The company depends upon Chinese imports. In FY24, China accounted for 36.8% of the material costs.
Valuation
The company demands an enterprise value (EV) of upto 7.1 times of FY24 sales. In comparison, ICE-based two-wheeler manufacturers such as Bajaj Auto, TVS Motor, Hero MotoCorp, and Eicher Motors trade at EV/sales between 2.8 and 7.8. TVS Motor and Bajaj Auto hold 19.3% and 11.3% market shares in the e2W market, respectively.
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