At all-time low! Ola Electric shares crash 52.5% from peak to fall below issue price of ₹76

Shares of Ola Electric Mobility dropped nearly 4 per cent in intraday trading on Tuesday, October 29, sinking to a new low of ₹74.82 and dipping below its issue price of ₹76 for the first time since listing. 

The stock, which debuted on the bourses on August 9, 2024, had a muted listing despite favourable market conditions. Ola Electric shares listed on a flat note at ₹75.99 on the BSE and ₹76 on the NSE. 

However, after the initial tepid listing, Ola Electric saw an impressive rally of over 107 per cent, reaching a peak of ₹157.53 on August 20, 2024. This upward momentum proved to be short-lived, as the stock entered a downward trajectory, plummeting 52.5 per cent from its high to today's low of ₹74.82. This decline has raised questions about the sustainability of Ola Electric’s early gains, as investors reassess the stock's long-term potential amid market volatility.

IPO Details

The IPO, valued at ₹6,145.56 crore, was open for subscription from August 2 to August 6. The public offer was priced in the range of ₹72-76 per share.

Following the three days of bidding, Ola Electric IPO closed with robust demand, garnering 4.45 times bids. The IPO received bids for 198.17 crore shares against 44.51 crore shares on offer. The retail investor segment saw a subscription of 4.05 times, while the non-institutional investors (NII) category was booked 2.51 times. The qualified institutional buyers (QIB) quota was subscribed 5.53 times and the employees' category saw 12.38 times bids.

Ola Electric IPO was a combination of a fresh issue of 72.37 crore shares, aggregating to ₹5,500 crore and an offer for sale of 8.49 crore shares, aggregating to ₹645.56 crore. Retail investors had to apply for a minimum lot size of 195 shares, requiring a minimum investment of ₹14,820. The issue also included a reservation of up to 797,101 shares for employees offered at a discount of ₹7 to the issue price.

The company plans to allocate the funds raised towards several strategic initiatives. This includes capital expenditure through its subsidiary, OCT, to expand the cell manufacturing plant’s capacity from 5GWh to 6.4GWh under phase 2 of the expansion project. Additionally, funds will be directed towards repaying or partially prepaying debt incurred by its subsidiary, OET. Investment in research and product development, organic growth initiatives, and general corporate purposes are also key focus areas for the proceeds.

Kotak Mahindra Capital Company Limited, Bofa Securities India Limited, Axis Capital Limited, SBI Capital Markets Limited, Citigroup Global Markets India Private Limited, Goldman Sachs (India) Securities Private Limited, ICICI Securities Limited and Bob Capital Markets Limited were the book-running lead managers of the OLA Electric IPO, while Link Intime India Private Ltd was the registrar for the issue.

Brokerage Views

Kotak Institutional Equities sees Ola Electric as well-positioned to leverage the EV growth opportunity, driven by rising EV adoption in two-wheelers, a focus on EV-only models, and end-to-end integration that should support margin growth. This integration allows the company to pursue aggressive pricing strategies, which could help it scale operations quickly. Despite this, Kotak views the stock as fairly valued, noting concerns over possible market share loss due to competition and service quality issues. The brokerage assigned the stock 'Reduce' rating, with a target price of ₹80, higher than its current trading price.

Meanwhile, HSBC revised its target price for Ola Electric downwards to ₹110 from ₹140, highlighting the stock’s high-risk-reward profile. HSBC believes Ola's success hinges on its EV bike and battery ventures, which could give it a competitive edge. However, it cited slower-than-expected market penetration and persistent service issues as concerns. It maintained a 'Buy' rating but lowered estimates based on continued channel checks.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.