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Salient features of the IPO: 

• Ola Electric Mobility Ltd. (OEML), a pure-play e-scooter maker is coming up with an IPO to raise around Rs. 6,150cr, which opens on 2 nd Aug. and closes on 6 th Aug. 2024. The price band is Rs. 72 - 76 per share.

• The company is backed by funds managed by marquee investors like SoftBank Investment Advisers, Tiger Global Management, Alpha Wave Global, Matrix Partners, Temasek, MacRitchie Investments etc.

• With success of this IPO, OEML will be the first pure-play electric-2W (E2W) manufacturer to list on the domestic stock exchanges. Most of the existing listed peers are mainly into the manufacturing and sales of internal combustion engine (ICE) 2Ws.

• The company has scaled down its valuation, compared to the last private funding. The current demanded valuation (at higher price band) is around 25% discount to the valuation based on the last private funding rounds during Jul-Sept. 2023 

• This public issue is a combination of fresh issue and OFS. OEML will not receive any proceeds from the OFS portion. From the fresh issue net proceeds, the company will be investing Rs. 1,600cr for research & product development activities; Rs. 1,228cr will be used for expanding cell manufacturing capacity; Rs. 800cr will be used for the re-payment/prepayment of certain outstanding borrowings and Rs. 350cr is likely to be utilized for funding various organic growth initiatives. Residual proceeds will be used for general corporate purposes.

• Few of the promoter & promoter group (P&PG) entities are participating in the OFS and offloading 4.209cr shares, while some of the investor shareholders are also partially offloading their stake in the company. PostIPO, P&PG will have 36.78% stake, while public and non-promoter & nonpublic shareholders will have 56.81% and 6.41% stake in the company, respectively.

Key competitive strengths:

• Pure EV player with a leadership position in the fast-growing Indian E2W market

• In-house R&D and technology capabilities

• Manufacturing at scale and supply-chain resilience

• Scalable platform-based design and development approach

• Direct-to-customer(D2C) omnichannel distribution model

• Eligibility for EV-related government incentives leading to cost advantages

• Execution capabilities

• Founder led company supported by a highly experienced and professional leadership team Risk and concerns:

• General slowdown in the global economic activities

• Reliance on government incentive schemes for sales volume

• Declining consumer preference towards electric 2Ws

• Rapidly changing cell technology & obsolescence of current cell technology

• Import disruptions for key raw materials mainly for the cell segment

• Continued loss making operations

• Competition

Below are the key highlights of the company:

• Despite India being the second largest 2W market globally, the electrification of 2W (E2W) is lower than China and other key European countries. E2W penetration will be driven by increasing affordability attributable to lower battery prices, improved driving ranges, regulatory support amongst other factors. In India, due to favorable total cost of ownership, E2Ws are at the forefront in the electrification of mobility. In FY24, E2W penetration was at 5.4% and is projected to account for 41-56% of the domestic 2W sales volume by FY28E. (Source: RHP)

• Further, around 20% of the 2W manufactured domestically are exported, of which around 75% is exported to geographies like Africa, Latin Americas and Southeast Asia. Thus, exports are also an additional opportunity for Indian E2W OEMs thereby further increasing their target addressable market.