Money-Wise: Ola Electric rides IPO market. Here's everything you need to know before investing

Ola Electric IPO:Ola Electric has gone public. Its IPO is currently the hottest-selling thing in the market after it opened on August 2. With this IPO the company, which has been a loss-making firm since its inception,is trying to raise more than Rs 6000 crore. The bidding will continue for three days and close on August 6 (Tuesday).

The allotment of the IPO shares is likely to happen on August 7 (Wednesday) and the shares should be credited to the demat accounts on August 8 (Thursday). The shares of Ola Electric will be listed on the BSE and NSE on August 9 (Friday).

But amid all the buzz, the investors remain confused if Ola Electric IPO will give them promising returns or not. Let's find out how promising is this IPO and what its future looks like.

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All about Ola Electric

Ola Electric is an electric vehicle (EV) company that produces EVs and their components. Till March 31, 2024, they were operating as a direct-to-customer distribution network and had 431 service centres and 870 experience centres across India.

In FY24, the company has a 35 per cent share in the electric two-wheeler market. Ola Electric was founded in 2017 and its managing director is Bhavish Aggarwal.

Ola Electric IPO's objective

The Ola Electric IPO consists of an offer for sale (OFS) of 8.49 crore equity shares which are valued at Rs 645.56 crore. The price band of the issue has been finalised at Rs 72-76 per share after its founder announced a 25-27 per cent discount on its last-round pricing. The investors are allowed to apply for a minimum of 195 shares and then it's multiple.

Also Read:Ola Electric's $734 million IPO plan marks the biggest Indian IPO this year

Explaining this strategic move of discounting the IPO price to WION, SVP - Retail Research Religare Broking Ltd Senior Vice PresidentDr Ravi Singh said, "Ola Electric has reduced the valuation of the issue to make the offer more attractive to investors. This strategic move will help generate higher demand for the shares and ensure the success of the IPO. Lowering the valuation in itself indicates that the company is very aware of the market conditions and the investor sentiments, thereby leaving room for future stock price appreciation."

Through this IPO, Ola Electric is trying to first repay its debt, organise funding for organic growth initiatives, expand its gigafactory and push all research and product development work.

Ola Electric IPO's GMP hints upside soar in prices

Ola Electric Mobility IPO's grey market premium (GMP) on the last day before it opened for subscription was +16. This uptick in the grey market indicated that there is an increasing demand for the IPO and it can be listed at Rs 92 per share which is 21.05 per cent higher than the offer price of Rs 76.

As the IPO geared for its launch, the GMP for the shares ofOla Electric traded at Rs 15 on August 2 (Friday), which hinted at a potential return of 20 per cent if the uptick in trends remains.

Loans, lawsuit, suspension of electric car: Turbulent financial past of Ola Electric

The company does appear promising in the field of EVs, but the ride has not been smooth till now.

The revenue of the company in the fiscal year 2023-24 increased to Rs 5009.83 crore, which was almost double the revenue generated in the last financial year.

However, the company's loss amounted to Rs 1584.44 crore in FY24 from Rs 1472.07 crore in FY23 and Rs 784 crore in FY22.

The company's material subsidiary - Ola Electric Technologies Private Limited - got working capital loans from banks and financial institutions worth Rs 746 crore till June 30, 2023. Till June 15, 2024, the total debt of the company is Rs 2,675.18 crore. If the company fails to repay these loans, it can directly impact its operations.

The electric car launch plans of Ola Electric were recently suspended and the Softbank-backed company decided to only focus on its e-scooter business. In 2022, the company announced its ambitious plan of launching an all-glass roof electric sports car in two years with the capacity to reach 100 km per hour within four seconds.

The company found itself in troubled waters when a lawsuit was filed by MapMyIndia, which was the company's service provider earlier, accusing the latter of copying their proprietary data.

Watch:Ola Electric denies MapMyIndia’s data theft allegations over Ola Maps

The EV market has till now not gained stability and is still fledgling amid a lack of charging infrastructure, a dearth of alternatives to lithium batteries, high maintenance costs and car buyers still remaining sceptical about purchasing EVs.

Is Ola Electric IPO right for you? Here's how to choose the right investment

If you are planning to purchase Ola Electric IPO or any other IPO, here are some tips by SVP - Retail Research Religare Broking Ltd Vice President Dr Ravi Singh to make the correct choice.

1. Opportunity Size and Market Potential: One should analyse the market size of the industry and the growth prospects. Large and growing markets can provide better opportunities for companies to flourish.

2. Growth Potential: An investor should evaluate the historical growth rates of the company and future estimates in terms of revenue growth, profitability, and market share. Companies with strong growth trajectories tend to be more attractive.

3. Management Competence: The management team must be qualified and experienced. One must look at the track record of the management while leading operations, its vision, and strategic plans.

4. Analysis of Competition: Competitive positioning is essential to be measured. Understand the company's stand in regard to competition through factors such as market share, product differentiation, etc.