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Ola Electric Mobility's shares surged 20% on their Mumbai trading debut on Friday, valuing the company at $4.8 billion, as investors bet on increasing adoption of electric models in the world's largest market for two-wheelers.

The stock had listed flat to its initial public offering (IPO) price of 76 rupees before rising to 91.20 rupees in a broader market that was up 1%.

Ola Electric's $734 million IPO, India's biggest so far in 2024, drew about $1.8 billion in bids this week.

The company has become the biggest player in a country where adoption of clean vehicles is still low, but rising, as Prime Minister Narendra Modi's government promotes clean energy.

Improving sentiment in the stock market also helped drive gains, analysts said. The Nifty 50 has rebounded about 1.3% in four sessions after plunging 2.7% on Monday amid U.S. recession worries.

"Despite receiving demand well below street expectation, Ola listed well above street expectations, which can be attributed to market mood," said Prashanth Tapse, senior vice president of research at Mehta Equities.

With a 39% market share as of July, Ola Electric dominates sales of electric scooters in India, after launching its first model just three years ago.

Its push into e-scooters has disrupted the market, forcing a pivot by incumbents such as TVS, Hero MotoCorp and Bajaj Auto.

Analysts said investors were also optimistic about Ola Electric's foray into motorcycles, larger two-wheelers that account for two-thirds of the Indian market. The company is expected to launch its range of electric motorcycles next week.

"The flat opening seems to have encouraged investors who weren't allotted shares in the IPO to hop on, and they seem to be optimistic of Ola's motorcycle launch," said Varun Baxi, analyst at Antique Stock Broking.

However, while Ola's revenues have soared, it is yet to turn a profit. In the year to the end of March, the company's sales rose 90% from the previous year, but its losses widened by 8%.

The company, which will get about $660 million from the IPO, is planning to invest most of the proceeds on research and development and its battery cell manufacturing unit.

Ola Electric has pinned its profitability on manufacturing its own battery cells for its scooters, which should make them more affordable. It is targeting commercial production of the battery cells by early 2025.

($1 = 83.8875 Indian rupees)