Ola Electric, a leading e-scooter manufacturer with the backing of SoftBank Group, has taken a significant step by submitting its initial draft papers to the Securities and Exchange Board of India (SEBI) for an initial public offering (IPO) aimed at raising ₹5,500 crore.
This move marks a milestone as the first IPO from an Indian electric vehicle (EV) manufacturer and the initial public offering by a two-wheeler maker in India since 2008. The recent funding round, supported by SoftBank and Temasek, valued the Bengaluru-based EV manufacturer at $5.4 billion.
The proposed IPO involves a new equity share issuance of ₹5,500 crore and a simultaneous offer for sale (OFS) of 95,191,195 equity shares with a nominal value of ₹10 each. Founder Bhavish Aggarwal plans to divest up to 47.4 million shares. Aggarwal had previously invested ₹45 lakh in Tork Motorcycles, a Pune-based electric vehicle startup.
Despite the absence of specific details on the opening and closing dates for subscription and the IPO price band, media reports suggest the public offering may begin in early 2024.
However, potential investors should consider several key risks associated with Ola Electric’s upcoming public offer:
1. **Limited Operating History:** The company has a brief operating history and has faced losses and negative cash flows.
2. **Supply Chain Risks:** There’s a possibility of defects, quality issues, or disruptions in the supply chain, affecting material costs and impacting manufacturing and delivery timelines.
3. **Product Performance Concerns:** Defects or performance issues in electric vehicles could harm the brand, reputation, and lead to product recalls or legal actions.
4. **Manufacturing Challenges:** Risks exist in maintaining in-house cell manufacturing capabilities at the Ola Gigafactory.
5. **Competition Challenges:** Intense competition in the automotive market poses a challenge to Ola Electric’s success.
6. **Dependence on Key Personnel:** The business heavily relies on key managerial personnel, and the loss of key individuals may disrupt operations.
7. **Customer Acquisition and Retention:** Failure to attract and retain customers could significantly harm the company’s prospects, financial condition, and operations.
8. **Charging Infrastructure:** Inadequate access to public charging infrastructure may adversely affect demand for electric vehicles.
9. **Product Reception:** The company’s revenue is currently derived solely from limited electric vehicle scooter models, and poor market reception could adversely affect the business.
10. **Uncertain Fund Utilization:** The funding requirements and the proposed use of Net Proceeds are based on management estimates without definitive arrangements, posing uncertainty.
Investors should carefully consider these risks before participating in Ola Electric’s IPO.
