Ola Electric IPO: Issue details, objectives, risk factors & more; Check 10 key things to know from DRHP

First time in country, the popular electric vehicle company submitted the draft papers for IPO on 22 December 2023. This electric vehicle company is Ola Electric. The founder of Ola electric, Bhavish aggarwal make history in financial Indian markets by become the first electric vehicle company that draft papers submitted for IPO. They take this move when electric vehicle industry gains the momentum globally, and stands itself as the prominent player in India that have sustainable mobility. With the $5.4 billion value estimated in 2023 and notable investors, Ola’s electric IPO generated huge interest among industry observers and investors.

DRHP, draft red herring prospectus submitted to SEBI, securities and exchange board of India do not give the particular information about IPO price band and timings, but it gives you a complete overview. If you want to look at issue details, objectives, risk factors, and other important key points from DHRP, then you should read this post completely.

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Overview of Ola Electric Business

The Ola’s company business model is build on 3 pillars, flexible manufacturing, R & D and technology innovation, and supply chain, and direct to consumer omnichannel distribution network. This network includes 935 professional centers in India, of which 414 are service centers. As per analysis, currently, Ola electric company provides five scooter models and has a 31 % market share in the E2W segment. It shows the high recognition ad popularity of Ola electric vehicle company in Market. The company also exports electric vehicles to the international Market.

As Ola is a popular electric vehicle company, it is associated with a brief history of negative cash flow and losses. So, investors need to be aware of risk factors, issue details, objectives, price bands, etc., associated with it. In 2023, the Ola Electric Company led the electric-2-wheeler India market in revenue generation.

Founder of Ola electric vehicle company

The founder of Ola electric vehicle company, Bhavish Aggarwal, is set to sell the 47.4 million shares in SoftBank group-backed electric scooter maker. They set the target to achieve a valuation of $7-$8 billion in early 2024. The IPO subscription dates have not announced yet, but reports tell us that it may become more expand in early 2024. The IPO band price or details are not come yet by OLA. They decide to transform the company into a public company with many expansions and innovations. So, they take the crucial step to submit draft papers for IPO. UT involves the restructuring and change in the company’s name from Ola Electric Mobility Pvt Ltd to Ola Electric Mobility Limited. They will make a pivotal transformation like this. The conversion from private to public company is an important procedure for companies that want to listen to themselves on the stock exchange.

Fundraising aim and dual issue structure

Ola electric vehicle company set aims to increase the good amount of Rs 7,250 crore by IPO and build more growth and confidence for EV market. The dual issue structure of IPO consists of the issuance of offers for sale and new shares. The new shares are take part to increase Rs 5,500 crore whereas OFS will involve the shares sales that worth Rs 1,750 crores.

Ola electric IPO- 10 key things to must know from DRHP     

Regarding the OPA electric IPO, here are the 10 key things, including risk, price band, objectives, etc, from DRHP that you should know

IPO Details

The first issue is the issue of equity shares up to Rs 5,500 crore and offers for sale of 95,191,195 equity shares at Rs 10 face value. The founder of Ola EV company, bhavish aggarwal will going to sell the shares of 47.4 millions, as per draft papers submitted on 22 December 2023. At same time, they also invest 45 lakh in Pune based electric vehicle startup tork motorcycles.

IPO Objectives

 According to the DRHP, net proceeds of up to ₹1226.4 crore from the cleat issue might be used for capital expenditure to be incurred by means of the subsidiary, Along with this, ₹1,60 crore could be used for investment in R&D ( research and development), and ₹350 crore could be used for growth initiatives and widespread company functions. Additionally, ₹800 crores can be used to pay off/pre-pay the indebtedness incurred by the subsidiary Ola Electric Technologies (OET).

Business Model

The business model of Ola Electric IPO is based on three structures. Firstly, R&D and technical platform with in-house design and development throughout EV technologies and components. Secondly, an adaptable production and supply chain platform, and thirdly, a D2C omnichannel distribution platform comprising 935 experience centers located across India, which include 414 service centers.

Company Financial

For the monetary year 2023, the enterprise’s sales from operations accelerated more than 7 times to to ₹2,630.93 crore towards ₹373.42 crore a year ago. For the 3 months ended 30 June 2023, sales from operations stood at ₹1,242.75 crore. The agency crowned the charts amongst Indian included electric powered 2-wheelers (E2Ws) and authentic equipment producers (OEMs) in phrases of revenue from E2W sales in FY23.

IPO Dates

Ola electric company not announced any information on opening and closing dates of IPO subscription yet. But there are many media reports come on it, that claim that IPO public issue will comes in early 2024.

IPO Reservation

 The issue is being made by book-building procedure, in which no longer much less than 75 % of the problem will be to be had for allocation on a proportionate foundation to qualified institutional customers (QIBs). They do not keep more than 15 % of an issue for allocation to non-institutional traders (NIIs). Also, there are not more than 10 % of issues available for allocation to retail person bidders.

IPO book lead managers

Citigroup Global Markets India Private Limited,  Kotak Mahindra Capital Company Limited, BofA Securities India Limited, Goldman Sachs (India) Securities Private Limited, Axis Capital Limited, ICICI Securities Limited, SBI Capital Markets , etc are book lead managers. Link Intime India Private Limited is the registrar of the company sales offer.

Product Portfolio

 Ola Electric brought its first EV model – S1 Pro, in August 2021 and currently has a portfolio of 5 scooter models. In 9 months of Ola Electric turning in its first EV scooter, it went on to come to be the user selling E2W participant in India based on registrations listed on the VAHAN portal of the road and highways ministry. As per the 2023 analysis, it has an E2W market percentage of 31 % and aims to explore exporting EVs to particular international markets, according to DRHP.

Losses Registered in FY23

Ola Electric’s total loss nearly doubled to ₹1,472 crore in FY23, from ₹784.1 crore in the past financial year, as expenses surged substantially. The IPO-bound electric vehicle company reported an EBITDA loss of ₹1,318 crore as its overall fees raise to ₹3,383 crore, in contrast to previous year. The organization saw its losses developing by nearly 293 % to ₹784 crore in FY22.

Key risk factors to the IPO

Among the key risk factors to the IPO, Ola Electric said in its DRHP that it has a restricted operating record and has incurred losses and bad cash flows from operations. It adds that it may hold to incur losses in close to-term. Quality issues and defects affect the manufacturing timelines of the employer. The organization faces various risks that avert its in-house cell manufacturing capabilities at the Ola Gigafactory.

As per the draft papers submitted by the Ola electric vehicle company for IPO, the funds released from issues will be allocated to capital expenditure for the Ola gigafactory project. It is by the OCT, subsidiary, debt repayment by OET subsidiary, product development and investment in research, expenses due to organic growth initiatives, and corporate general purposes.

Major Risk Factors

As investor, if you are going to invest in any company or asset, you should first make look at risk factors. If we talk about Ola Electric, they released the draft papers recently on Friday for IPO. It happens first time in history when EV company submit draft papers. Ola Electric, in the DRHP draft red herring prospectus, outlines the various risk factors that investors should know. Moreover it is come to know that company acknowledge that they do not operate for long time, and results in negative cash flow and losses. This is a major risk factor associated with it. The another risk factor of Ola electric is their quality issues and manufacturing defects. It make challenges for company and affects manufacturing timeline.

On this, draft paper highlights the risk that are faces by Ola electric in house cell manufacturing team. It also show the need for company to adopt the complete risk management approach to manage these risks.

Conclusion

Ola Electric IPO currently presents an investment opportunity in the evolving and dynamic EV market of India. The transparent disclosure of company operational and financial details from DRHP gives a complete overview to investors. It make it easier for investors to determined the current and future aspects of Ola electric and helps them to make informed decision regarding investment.

The strategic IPO allocation by Ola proceeds towards important areas like debt repayment, R&D, research, and development. The organic growth initiatives of Ola electric reflects Ola electric commitment to strategic and sustainable business practices. As electric vehicle company gains the prominent in EV market continuously, it works as the strong milestone to India and make efforts towards the cleaner and sustainable transport ecosystem. It is suggested to enthusiasts, industry analysts, and investors to make close look at the Ola electric IPO public offering, issue details, price band, objectives, risk factors mentioned above, and then make investment.

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