Ola Electric gets Sebi nod to launch ₹5,500 crore IPO

Bhavish Aggarwal-led Ola Electric expects a formal approval for its ₹5,500 crore initial public offering (IPO) from India's markets regulator by the end of this week, setting the stage for the first IPO by a pure-play electric two-wheeler maker in India.

According to a person familiar with the matter, the company has obtained the Securities and Exchange Board of India (Sebi)'s nod for its IPO, and the final observations are expected within a week. 

Ola Electric plans to list within a month, citing favourable market conditions, despite recent market volatility, the person added, seeking anonymity.

Ola Electric and Sebi didn't respond to Mint's queries till press time.

IPO in the works

In March, Mint reported that Ola Electric was nearing the signing of anchor investors for its IPO, citing people in the know. The company had also been highlighting its under-development, cutting-edge battery technology as its unique selling proposition during roadshows.

Investors such as Singapore-based Eastspring, a subsidiary of Prudential Plc, and UK-based Pictet, had expressed interest in becoming anchor investors.

In December, Ola Electric had filed a draft red herring prospectus (DRHP) with Sebi to raise up to ₹5,500 crore through a fresh equity issue. Additionally, it has proposed an offer for sale (OFS) of 95.12 million equity shares at a face value of ₹10. Founder and chief executive Aggarwal plans to sell the largest chunk of shares: 47.3 million, or half of the total shares offered for sale.

The filing of the draft papers coincided with Ola Electric surging past the 40% market share milestone in electric two-wheeler sales, fuelled by substantial discounts and a broad selection of competitively-priced e-scooters across price ranges. As of May, Ola remained the dominant player in India's e-two-wheeler market by volume.

EV volumes stagnating

However, the electric two-wheeler market in India has witnessed flat volumes over the past three months. Registrations for high-speed electric two-wheelers declined by 27% in May compared to the previous year's high base. 

Following the government's decision to significantly reduce FAME-II subsidies on electric two-wheelers starting 1 June, 2023, the segment had witnessed a surge in pre-purchases to avail the benefit of lower prices. 

Since April, the Centre has yet again reduced subsidies for e-two-wheelers as part of its transitional policy to bridge the gap between the expiration of FAME-II (on March 31, 2024) and the forthcoming FAME-III policy implementation.

In May, Ola Electric held an impressive 48% market share. However, electric vehicles (EVs) comprised only 5% of the two-wheeler market, maintaining levels similar to last year.

Interestingly, investors have also been expressing concerns about the future growth triggers for e-two-wheeler startups. “We will look out for the next trigger for growth in e-two-wheelers, as stagnating volumes for the past few months have put the emphasis back on profitability and efficient capital deployment for EV companies,” an investor associated with the IPO said, requesting anonymity. 

“With the upcoming FAME-III, the quantum of subsidies on e-two-wheelers is only likely to reduce further, which will make these factors even more central to assessing the viability of these businesses,” he added.