Ola Electric Mobility made a strong debut on the Mumbai stock market on Friday, with its shares surging 20 per cent, reflecting investor confidence in the growing electric vehicle (EV) sector in India. The company, now valued at USD 4.8 billion, is poised to capitalize on the increasing adoption of EVs in the world's largest market for two-wheelers.
Strong market debut amid investor confidence
Initially, Ola Electric's stock opened flat at its initial public offering (IPO) price of 76 rupees. However, the stock quickly gained momentum, rising to 91.20 rupees, outperforming the broader market, which saw a 1 per cent increase in the Nifty 50 index.
India’s largest IPO of 2024
The USD 734 million IPO marks India’s largest offering so far in 2024. As a leader in the electric scooter market, Ola Electric is well-positioned in a country where the adoption of EVs is steadily rising, driven by Prime Minister Narendra Modi’s push for clean energy initiatives.
Market sentiment and growth prospects drive gains
Analysts attribute the stock’s impressive performance to the improving sentiment in the stock market and optimism surrounding Ola Electric’s future growth. The Nifty 50 has rebounded by about 1.3 per cent over the past four sessions, recovering from a 2.7 per cent drop earlier in the week due to concerns over a potential U.S. recession.
Prashanth Tapse, Senior Vice President of Research at Mehta Equities, noted that despite lower-than-expected demand, Ola’s listing exceeded market expectations, buoyed by positive market sentiment.
Dominance in electric scooter market
With a 39 per cent market share as of July, Ola Electric dominates India’s electric scooter market, having launched its first model just three years ago. Investors are also bullish on the company’s plans to enter the electric motorcycle segment, which accounts for two-thirds of India’s two-wheeler market. The company is expected to unveil its electric motorcycle range next week.
Varun Baxi, Lead Analyst at Nirmal Bang Institutional Equities, pointed out that the stock’s flat opening encouraged investors who missed out on the IPO to buy shares, further fueled by excitement over the upcoming motorcycle launch.
Challenges: Profitability in focus
Despite its soaring revenues, Ola Electric has yet to turn a profit. For the fiscal year ending in March, the company’s sales increased by 90 per cent year-on-year, but its losses also widened by 8 per cent. Ola Electric’s founder, Bhavish Aggarwal, emphasized the company’s focus on achieving profitable growth, assuring investors of a long-term profitability strategy.
Investment in R&D and Battery cell manufacturing
With approximately USD 660 million from the IPO proceeds, Ola Electric plans to invest heavily in research and development, particularly in its battery cell manufacturing unit. The company aims to begin commercial production of its battery cells by early 2025, a move expected to lower costs and enhance the affordability of its scooters.
Bhavish Aggarwal highlighted Ola Electric’s aggressive growth phase, emphasizing investments aimed at securing the company’s future growth and market leadership.
(1 USD = 83.8875 INR)
ALSO READ: WhatsApp introduces event end-time feature for Community Chats: All you need to know
Inputs from Reuters
