Investors Flock to Ola Electric IPO: Local and Global Giants Eye $350M Anchor Book in India’s Top EV Manufacturer

Mumbai: Both overseas and local investors are eager to participate in Ola Electric Mobility’s IPO, which is valued at around $4 billion. The IPO will open on August 2.

Domestic investors like SBI AMC, HDFC AMC, Nippon Life India AMC, and UTI AMC plan to bid about $200 million each. International investors, including Fidelity, Nomura, and Norway’s Norges Bank, will bid between $75-100 million each.

The highest amount an investor can bid is around $30 million. Ola Electric’s IPO is significant as it is the first automaker’s fundraising in over 20 years, with Maruti Suzuki being the last in 2003.

Anchor Book

Ola Electric’s anchor book size is expected to be $350 million (₹3,300 crore), which is 45% of the total IPO size of ₹6,200 crore. This includes ₹5,500 crore from new shares and the rest from the sale of 85 million shares by existing investors. Ola’s CEO Bhavish Aggarwal will sell 37.91 million shares, reducing his stake to 37% from 45%. The anchor book will open on August 1, the IPO will run from August 2-6, and the listing is expected on August 9.

Factors

Several factors are attracting institutional interest in Ola Electric’s IPO. It will be the first pure electric vehicle (EV) manufacturer listed in India, attracting significant investor interest. The current valuation is nearly half of what the company expected in December 2023 due to input from institutional investors and emerging challenges.

Safety Margin

The margin of safety for investors has increased, as the company realized it cannot be valued like Tesla. The current valuation implies an EV/sales ratio of 6.7 times based on FY24, within the range of 3.5-7.8 for Indian internal combustion engine (ICE) two-wheeler manufacturers.

“If two-wheeler EV penetration increases by 30-40% in the next five to six years, there is enough margin for long-term investors,” said a source close to the development. Currently, EV penetration in the two-wheeler segment is around 5%, while in the scooter segment it has reached about 15%.

Ola Electric vehicle registrations doubled to 329,386 units in FY24 from 152,547 the previous year. The company’s market share increased to 48.68% in the June quarter from 39.38% in the January-March period. In FY24, revenue rose to ₹5,243 crore from ₹2,782 crore the previous year, while net loss expanded to ₹1,584 crore from ₹1,472 crore. The company had gross debt of ₹2,389 crore in FY24 compared with ₹1,645 crore in FY23.