Ola Electric's ₹7,500-crore IPO Secures SEBI Approval

Electric vehicle manufacturer Ola Electric has obtained approval from market regulator Sebi for its initial public offering (IPO), aiming to raise ₹7,250 crore, sources informed Moneycontrol. Ola Electric is the first Indian EV two-wheeler company to file for an IPO. The company submitted its draft red herring prospectus (DRHP) to the market regulator on December 22, 2023.

On May 25, Moneycontrol exclusively reported that Ola Electric had enlisted Kotak Mahindra Capital and Goldman Sachs to manage its IPO slated for early 2024. The IPO includes a fresh issue worth ₹5,500 crore and an offer for sale (OFS) amounting to ₹1,750 crore, bringing the total to ₹7,250 crore. According to the company's draft red herring prospectus (DRHP), existing shareholders plan to sell 95.19 million shares in the OFS.

Ola Electric’s founder Bhavish Aggarwal will be selling 47.3 million shares. Additionally, the company’s initial investors—AlphaWave, Alpine, DIG Investment, Matrix, and others—will be selling a total of 47.89 million shares through the OFS.

The firm is also looking at a re-IPO placement of shares worth ₹1,100 crore. If this happens, the size of the fresh issue will be reduced to that extent.

According to the DRHP, Ola Electric plans to allocate the raised funds for capital expenditures (capex), debt repayment, and research and development (R&D). The company intends to use approximately ₹1,226 crore for capex, ₹800 crore for debt repayment, and the largest portion, about ₹1,600 crore, for R&D. Additionally, ₹350 crore will be dedicated to inorganic growth.

Sebi's approval coincides with Ola Cabs, the ride-hailing arm of Ola Electric, starting early talks with investment banks about a possible IPO. Ola Electric currently leads the EV two-wheeler market, holding a market share of about 52%. Data from the Government’s VAHAN website shows that the company registered 34,000 units in the month, representing a 54% year-on-year growth.

Ola Electric reported consolidated revenues of ₹2,782 crore for the financial year ending March 2023, reflecting a growth of nearly 510 percent. Despite this increase in revenue, the company’s net loss expanded to ₹1,472 crore due to higher expenses. In the first quarter of 2023-24, Ola Electric posted a total income of ₹1,272 crore and incurred losses of ₹267 crore. As of June 30, 2023, the company's net worth stood at ₹2,111 crore.

As outlined in the draft red herring prospectus (DRHP), the proceeds from the fresh issue will be allocated to capital expenditure (capex), debt repayment, and research and development (R&D). Specifically, the company plans to invest ₹1,226 crore in capex, allocate ₹800 crore for debt repayment, spend ₹1,600 crore on R&D, and dedicate ₹350 crore to organic growth initiatives.

Sebi’s approval, along with a strong market environment, could potentially allow Ola Electric to launch its IPO within a month, according to sources familiar with the situation. However, this timeline is not yet confirmed. The IPO is significant for several reasons: it marks the first time in decades that a two-wheeler manufacturer is entering the public market, and it is also Bhavish Aggarwal's first attempt at taking a company public. The firm is aiming for a valuation of $7-8 billion.