Ola Electric IPO GMP soars: Will it ride the tide? Check brokerage calls

Ola Electric IPO: The Softbank-backed initial public offering (IPO) of leading electric vehicle (EV) market player Ola Electric opens for public subscription on Friday, August 02, 2024. The Bhavish Aggarwal-led company, which commands nearly a 35 per cent market share in India's electric two-wheeler market in FY24, is engaged in building vertically integrated technology and manufacturing capabilities for EVs and EV components, including cells.

Several brokerage firms, including LKP Securities, Anand Rathi Research Team, and Kunvarji Wealth Solutions, have shared their outlook on India's first EV startup company's IPO ahead of its opening for public subscription.

Ola Electric IPO details

The Ola Electric IPO comprises 723,684,210 equity shares worth approximately Rs 5,500 crore and an offer for sale with the promoters and investors offloading 84,941,997 shares worth Rs 645.56 crore. The public issue will be available at a price band of Rs 72-76 per share with a lot size of 195 shares.

Investors can bid for a minimum of 195 shares of Ola Electric IPO and in multiples thereof. The minimum amount required by a retail investor to bid for Ola Electric IPO is Rs 14,820.

The three-day subscription window for Ola Electric IPO will close on Tuesday, August 6, 2024. The basis of allotment for the Ola Electric IPO shares is scheduled for Wednesday, August 7, 2024, and the company's shares are likely to be credited into demat accounts on Thursday, August 8, 2024. Ola Electric shares are scheduled to make their debut on the bourses—BSE and NSE—on Friday,  August 9, 2024.

Link Intime India is the registrar for Ola Electric's IPO. The book-running lead managers for the public issue include BofA Securities India, Goldman Sachs (India) Securities Private, Kotak Mahindra Capital Company, Axis Capital, SBI Capital Markets, Citigroup Global Markets India, BoB Capital Markets, and ICICI Securities.

Ola Electric IPO GMP

The grey market premium (GMP) of Ola Electric IPO has been around Rs 15-16 or 20-21 per cent at the upper end of the IPO price for the last three days. The GMP usually serves as an indicator of the rising demand for IPOs.

Ola Electric IPO objective

Ola Electric intends to use the net proceeds from the IPO to repay debt, expand its gigafactory, fund organic growth initiatives, and support research and product development, with the remaining proceeds allocated for general corporate purposes.

Ola Electric financial details

The Bhavish Aggarwal-led company's revenue from operations during the fiscal year 2023-24 jumped to Rs 5009.83 crore, nearly double the Rs 2690.92 crore reported in FY23. Ola Electric's EBITDA declined to Rs 1040.19 crore in FY24 from Rs 1197.09 crore reported in FY23. Meanwhile, the company's loss widened to Rs 1584.44 crore in FY24 from Rs 1472.07 crore reported in FY23, according to the RHP papers.

Should You Subscribe to the Ola Electric IPO?

Here are the recommendations of the brokerages for Ola Electric IPO:

LKP Securities - Subscribe for Long Term

Analysts at the LKP Securities believe that Ola Electric, being the market leader in the domestic EV two-wheeler industry, stands to benefit from any positive developments in the sector. The array of new launches, along with EV bike launches next year, should enable the company to retain its market share (45 per cent by the end of Q1 vs. 39 per cent at the end of Q4), said the brokerage in its report. Higher volumes are expected to bring in operating leverage, thus reducing losses, which the brokerage believes can happen in the mid-term.

"Therefore, based on the narrative of EV proliferation in the country (current EV scooter penetration at 15 per cent), we believe Ola will ride the tide as the only pure-play two-wheeler EV. Therefore, keeping a cautious view on the demand and the reduction in losses for Ola, we recommend subscribing to this IPO with a long-term perspective," said LKP Securities.

Anand Rathi Research Team - Subscribe for Long Term

According to the Anand Rathi Research Team, at the upper price band, the company is valued at a Marketcap/Sales ratio of 6.6x with a market cap of Rs 33,522 crore post-issue of equity shares. 

“Currently, top global automobile entities are trading between 1-8x Marketcap/Sales.  Therefore, on the valuation front, we believe that the company is richly priced. Thus, we recommend a 'Subscribe – long term' rating to the IPO with a higher risk appetite," said the brokerage.

Kunvarji Wealth Solutions - Subscribe 

As per Kunvarji Wealth Solutions, Ola Electric is operating in a growing market that will shape the future of green transportation in the nation. Hence, the demand for EV products, from bikes to battery cells, is anticipated to rise, where the company is expected to prove its stand with inclusive and 360-degree growth.

"We recommend subscribing to this IPO with a view of long-term investment, as near-term volatility is expected until bottom-line growth stabilises. The company's debt burden is likely to reduce gradually and is expected to contain losses," said the brokerage.