Ola Electric GMP IPO ends in zero despite the issue seeing 3x bids on its third day

Ola Electric Mobility’s initial public offering (IPO) continued to see a lukewarm response from investors on the third and final day of the bidding process amid turbulent market sentiment. The issue managed to sail through the second day and ended the first day with a bidding of 35 per cent.

Ola Electric Mobility is selling its shares in a price range of Rs 72-76 per share. Investors can apply for a minimum of 195 shares and multiples thereof. The company aims to raise Rs 6,145.56 crore through the IPO, which includes a fresh sale of shares worth Rs 5,500 crore and an offer for sale (OFS) of 84,941,997 equity shares.

As per the data, investors submitted bids for 1,39,41,99,690 ordinary shares, which is three times more than the 46,51,59,451 ordinary shares offered for subscription till 2.30 pm on Tuesday, August 6. The three-day bidding for the issue, which began on Friday, August 2, ends today.

The allocation for retail was subscribed 3.64 times, while the portion reserved for qualified institutional bidders (QIBs) was subscribed 3.22 times. The portion for employees was reserved 11.01 times. However, the amount reserved for non-institutional investors (NIIs) was reserved 2.07 times.

Bengaluru-based Ola Electric Mobility was founded in 2017. It is exclusively engaged in the manufacturing of electric vehicles. Its factory, Ola Futurefactory, is primarily engaged in manufacturing electric vehicles and some basic components for electric vehicles, such as batteries, motors, and vehicle frames.

Ola Electric’s Grey Market Premium (GMP) has come down sharply amid rising volatility in the broader markets amid a weakening of tender sentiment. Last checked with multiple sources, the company was not charging any premium in the informal market. However, the premium was Rs 4 on the second day of the tender.

Brokerage firms have mixed views on the IPO. Some analysts are positive about the company’s leadership in the E2W market, focus on the EV space, government pressure and the growing EV culture. However, they believe that the biggest problems in this regard are the loss-making nature of the business and high valuations.

Ola Electric is asking for an EV/sales multiple of 6.3, which is a significant premium. It has undertaken a huge capital expenditure in the initial years and has also planned a huge capital expenditure in the medium term, reflecting its ambitious growth plans. A key concern is its dependence on government subsidies to generate sales and loss-making operations, Choice Broking said.

“Considering the dominant position held by the company in the E2W sector, the benefits of its reverse-entry initiatives such as cell manufacturing, and its broad adoption in energy storage applications, we believe the requested valuation appears reasonable,” it added, giving the issue a “subscribe with caution” rating.

Ola Electric allotted 36.4 crore shares to anchor investors to rake in Rs 2,763 crore at a price of Rs 76 per share. Ola Electric had reported a net loss of Rs 1,584.40 crore on revenue of Rs 5,243.27 crore for the financial year ended March 31, 2024. The company’s net loss stood at Rs 1,472.08 crore on revenue of Rs 2,782.70 crore in FY 2022-23.

Ola electric is the leader in the fast-growing market with a 35 per cent share, but stiff competition could limit profitability in the near term, potentially keeping the company in the red. Meanwhile, Hero’s recent investment in Ather Energy values ​​the company at 3.2 times FY24 sales, much lower than Ola’s valuation of 6.9 times, Nirmal Bang Securities said.

“We believe that Ola, given its market leadership position, faster growth and investment in cell production, deserves higher valuations than Ather. Its current valuation seems high, hence we recommend subscribing to the issue for a longer term,” the statement reads.

The company has reserved shares worth Rs 5.5 crore for eligible employees of the company, who will get a discount of Rs 7 per share on the issue. 75 per cent of the net offer has been reserved for qualified institutional bidders, while non-institutional investors will get 15 per cent of the net offer. Retail investors will get only 10 per cent of the net offer.

BofA Securities India, Axis Capital, Kotak Mahindra Capital, SBI Capital Markets, Citigroup Global Markets India, Goldman Sachs (India) Securities, ICICI Securities and BOB Capital Markets are the lead managers for the IPO, while Link Intime India is the registrar of the issue. The company’s shares are likely to be listed on the BSE and NSE on August 9, Friday.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.