Should you subscribe to OLA Electric IPO or not? Strength & weakness of the company to keep in mind

The much-awaited OLA Electric IPO hit Dalal Street on Friday, August 2, 2024, and till 12:54 IST, Bombay Stock Exchange Data suggested that its subscription status is 23%. BSE report further stated that the quota for retail investors received 1.07 times subscription, while the non-institutional investors part got subscribed 10%. The portion for Qualified Institutional Buyers (QIBs) portion is yet to be booked, and the employee portion was booked 3.63 times.

Money can be invested in OLA Electric IPO till August 6, 2024. The electric two-wheeler company is looking to raise Rs 6,145.56 crore. Before the IPO, it has already raised Rs 2,763.03 crore from anchor investors. This is the first IPO of an electric vehicle company in the country. As per reports, OLA Electric's shares started trading in the grey market even before the issue opened. It is reported that OLA Electric shares are trading at a premium of Rs 13 or 17.11 percent to the upper price band of the IPO of Rs 76 in the grey market. On this basis, the shares can be listed for Rs 89, however, the final listing price is yet to be declared. 

Now, the question arises whether OLA Electric IPO should be subscribed or not. Below is what the expert thinks, including the company's strengths & weaknesses- 

Strengths of OLA

1. The market for electric two-wheelers is growing continuously in the country and it is the largest company in this segment in India. It is also a pure electric vehicle company.
2. The company has good experience in its field and its product is also diversified.
3. The company also has a modern and large manufacturing plant and has also invested heavily in research and development (R&D).
4. As per reports, the company's penetration in India's electric two-wheeler market is expected to expand from approximately 5.40% of domestic two-wheeler registration sales reported on the VAHAN portal in Fiscal 2024 to 41–56% of the domestic 2W sales volume by Fiscal 2028. 

Weaknesses of OLA Electric

1. The company is heavily dependent on third parties for some raw materials.
2. The financial data shows that the company is still in losses and its capital expenditure is also continuing.
3. The company is in a high growth phase, but it is yet to report profit at the EBITDA and the profit-after-tax level as it is still in the investment phase and undertaking substantial capex. 
4.  Ola Electric has remained loss-making both at the net and operating levels, with consistent cash outflows since its inception in 2017.
5. Ola also faces tough competition. Other auto giants in the E2W market are Bajaj Auto, Hero MotoCorp, and TVS Motor. They pose a significant threat given they have ample capital to commit to their EV businesses aggressively with an already established distribution network.

More about OLA Electric IPO

As per reports, the price band for OLA Electric IPO is Rs 72-76 per share and the lot size is 195 shares. The company is issuing 72.37 crore new shares worth Rs 5,500 crore. There is also an offer for the sale of 8.49 crore shares worth Rs 645.56 crore. In the OFS, the company's promoter Bhavish Aggarwal as well as investors SoftBank, Temasek, and Matrix Partners India will also put shares for sale. After the IPO closes, the shares will be listed on BSE and NSE on August 9.

75 percent of the OLA Electric IPO is reserved for qualified institutional buyers, 10 percent for retail investors, and 15 percent for non-institutional investors. Kotak Mahindra Capital Company, BofA Securities India, Axis Capital, SBI Capital Markets, Citigroup Global Markets India, Goldman Sachs (India) Securities, ICICI Securities, and BOB Capital Markets are the book-running lead managers for the IPO. 

DISCLAIMER: Before subscribing for OLA Electric IPO, True Scoop advises you to consult your financial advisor as stock market & IPOs are subject to market risks