Ola Electric IPO Faces Market Volatility Despite High Investor Interest
News Mania Desk/Agnibeena Ghosh/6th August 2024
Ola Electric Mobility’s initial public offering (IPO) has encountered a turbulent ride amidst a jittery market environment, even as investor enthusiasm remained robust on the third day of bidding. Despite significant interest, the IPO’s grey market premium (GMP) has dwindled, reflecting broader market uncertainties and investor apprehensions.
The IPO, which opened for bids on August 2, 2024, is set in the price range of Rs 72-76 per share. Investors had the option to apply for a minimum of 195 shares, with the company aiming to raise Rs 6,145.56 crore. This amount includes a fresh share issue of Rs 5,500 crore and an offer-for-sale (OFS) of nearly 85 million equity shares. By the afternoon of August 6, the IPO had garnered bids for approximately 139.42 million shares, a threefold increase over the 46.52 million shares available. The bidding concludes today.
The allocation for different investor categories showed varying levels of interest. The retail portion was subscribed 3.64 times, indicating strong individual investor participation. Qualified Institutional Bidders (QIBs) showed a subscription rate of 3.22 times, while the employee allocation was oversubscribed 11.01 times. Conversely, the Non-Institutional Investors (NIIs) segment was subscribed 2.07 times.
Ola Electric, based in Bengaluru and founded in 2017, is a prominent player in the electric vehicle sector. The company manufactures electric vehicles and critical components like battery packs and motors at its Ola Futurefactory. However, despite its market leadership and substantial growth prospects, the IPO’s GMP has recently turned nil. This decline in GMP suggests that the stock is currently trading at no premium in the unofficial market, a significant drop from the Rs 4 premium noted on the second day of bidding.
Brokerage firms have provided mixed opinions on the IPO. Some analysts view Ola Electric’s dominance in the electric two-wheeler (E2W) market and its commitment to EV technology positively. They appreciate the government support for the EV sector and the company’s strategic investments. Nonetheless, concerns over the company’s ongoing losses and its high valuation have been highlighted as potential risks. Ola Electric is seeking an EV/sales multiple of 6.3 times, which is considered substantial. The company’s ambitious capital spending plans and heavy reliance on government subsidies for sales generation contribute to the cautious outlook.
Choice Broking has advised a ‘subscribe with caution’ stance, acknowledging the company’s leadership and strategic investments while noting concerns about its high valuation and loss-making nature. On the other hand, Nirmal Bang Securities pointed out that while Ola Electric commands a significant market share, its valuation appears high compared to competitors like Ather Energy. Hero’s recent investment in Ather values it at a lower multiple of 3.2 times FY24 sales, which contrasts with Ola’s higher valuation.
The IPO has allocated Rs 5.5 crore worth of shares to eligible employees at a discount of Rs 7 per share. Qualified institutional bidders have been allocated 75% of the net offer, non-institutional investors 15%, and retail investors 10%. The issue is managed by top investment banks including BofA Securities India, Axis Capital, Kotak Mahindra Capital, and others, with Link Intime India serving as the registrar. The shares are expected to be listed on the BSE and NSE on August 9, 2024.
