Ola Electric secures $300-million funding at $6-billion valuation

Electric scooter maker Ola Electric has secured $300 million (about Rs 2,500 crore) in its latest funding round, which will push up its valuation to $6 billion, merchant banking sources told Business Standard on Monday.

The company had raised $200 million at a valuation of $5 billion in January 2022.

The latest round is led by a leading sovereign fund company and has received an overwhelming response from other investors, the sources said, adding that the paper work for the deal will be finalised in a few weeks.  

SoftBank Group, which was one of the first major investors in the company, is not participating in this round. An Ola spokesperson, however, declined to comment on the fundraise.

In the previous deal, Ola Electric had raised $200 million from investors like Tekne Private Ventures, Alpine Opportunities Fund, and Edelweiss. The company has so far raised nearly $900 million in multiple funding rounds.      

The money from the latest deal will be used by the company to immediately ramp up its capacity of electric two-wheelers from 0.5 million to 2 million per annum. 

The funds will also help the firm to set up an advanced cell chemistry battery plant, for which it is already eligible for incentives under the production-linked incentive scheme. An electric passenger car facility is also in the works and may come to fruition some time next year.

The company has laid out a plan to eventually build a 10-million per annum two-wheeler plant and also increase its cell-making battery capacity from 20 gigawatt-hours (GWH), for which it is eligible for PLI, to 100 GWH to meet its captive requirement.  

Ola has a current revenue run rate of $1.2 billion and is already Ebitda (earnings before interest, taxes, depreciation, and amortisation) positive on its electric two-wheeler business -- a feat achieved in 18 months of its launch. It has also emerged as the largest electric scooter player in the country. In April this year, it logged its highest registrations (sales are higher) since its launch at 21,560 electric scooters, grabbing 34 per cent of the market, according to the VAHAN data. On the other hand, sales of its rivals like Ather, Ampere, Okinawa, Hero Electric, and TVS fell in the same period.

The company has ambitious plans -- it is looking at hitting cumulative sales of 1 million by the end of this year (currently, its 300,000 e-scooters are running on the roads), besides launching its electric motorcycle in the second half of this year. Also in the works is its most inexpensive electric scooter, which will be available from July, at a price of Rs 84,999, which is expected to push up its sales in a big way.

The company, however, faces some real challenges such as the government’s recent decision to bring down the FAME II subsidy on each scooter by nearly a third. Without the subsidy, the company may take a hit of Rs 40,000-50,000 per scooter at the premium end. As a result, prices of various models are expected to go up. Hence, most of these companies will have to rejig their strategy, go for trim-down versions of the same model, and hike prices by 10 to 15 per cent.