Ola Electric, India's largest electric two-wheeler maker, saw its shares jump as much as 20% in their debut on Friday, making it the biggest IPO by an Indian company in two years.
Shares of the Bengaluru-headquartered company, which counts SoftBank and Temasek as backers, surged to as high as ₹91.18 (about $1.1) after opening at the high end of its IPO range of ₹76. The company filed to list at a valuation 26% lower than the $5.4 billion it had raised in a funding round in October 2023 and significantly lower than the $6.5 billion to $8 billion it had initially targeted for the IPO.
The stock is currently trading at ₹90, giving Ola Electric a market capitalization of $4.75 billion.
Ola Electric has emerged as a dominant player in the electric two-wheeler market in India, with a 46% share in the segment. Ola launched its first electric scooter in December 2021 and sold over 330,000 units in the fiscal year ended March 2024.
However, the company is not yet profitable. In the last fiscal year, the company reported a net loss of 16 billion (about $200.5 million) and an EBITDA loss of 13 billion (about $162.8 million) on annual revenue of 50 billion (about $626.3 million).
The company has invested in vertical integration to better control quality, supply and costs. There are initiatives to develop its own battery cell technology and build manufacturing capabilities. It plans to expand capacity to 20 GWh by Q2 2026.
The electric vehicle market in India is heading towards significant growth. Investment banking and research firm Macquarie expects electric two-wheelers to gradually gain share in the two-wheeler market in India, with market penetration projected at 7%, 10%, 13% and 16% in fiscal years 2025, 2026, 2027 and 2028, respectively.
This is quite a departure from Ola Electric’s much more optimistic forecast for electric two-wheelers, which the company said in its IPO prospectus that it expects the segment to achieve a market share of 41%-56% by FY28.
The recent reduction in government subsidies for electric two-wheelers has impacted the growth trajectory of the segment. Nevertheless, the Indian electric vehicle market has seen some consolidation. The Herfindahl-Hirschman Index (HHI), which measures market concentration, has increased from 1,200-1,330 in FY2022-2023 to 2,810 as of June 2024. This is higher than the 2,160 for conventional two-wheelers that run on internal combustion engines.
