India’s Ola Electric files for $662 million IPO

India’s Ola Electric seeks to raise $661.8 million by selling new shares in an initial public offering, the six-year-old Bengaluru-headquartered startup said in draft papers filed with the country’s market regulator on Friday.

The paperwork for the initial public offering follows Ola Electric raising $384 million from Temasek and Indian government-backed lender State Bank of India in a debt-heavy funding round in late October. The startup, which has raised nearly $1 billion over the years, was valued at $5.4 billion in the October financing, TechCrunch reported earlier. The startup is targeting a valuation of $6.5 billion to $8 billion in the IPO, a person familiar with the matter told TechCrunch.

The startup also plans to sell roughly 95.2 million shares from existing investors and shareholders, including some of those from founder Bhavish Aggarwal (pictured above), Alpha Wave Ventures, Tiger Global, Matrix Partners and SoftBank, according to the draft prospectus. Kotak, Citi, Bank of America, Goldman Sachs, Axis, ICICI, SBI and BOB Capital are running the book for the IPO, according to the prospectus.

Ola Electric plans to use roughly $150 million of the total proceeds for expanding the manufacturing capacity of its electric vehicle cell factory to 6.4 gigawatt hours from 5 gigawatt hours, the prospectus said. It plans major EV expansion into cars, batteries and cells with a large manufacturing hub in India. Aggarwal aims to produce the company’s own two-wheelers, cars and lithium cells.

Led by Aggarwal¹, Ola Electric emerged out of the ride-hailing giant Ola in 2019. The two firms continue to share a number of resources² and some Ola investors had requested Aggarwal to create a holding entity for both the firms and grant them allocation in the parent firm.

Its losses in the fiscal year 2023 stood at $176 million, according to the document. The startup listed multiple risk factors in its report, including if the government stops giving incentives to local electric vehicle makers, as well as the possibility of undergoing many key managerial changes. “Our employee attrition rate was 42.06% and 47.48% in the seven-month period ended October 31, 2023 (on an annualized basis) and Fiscal 2023, respectively,” Ola Electric said.

But all said and done, it’s remarkable that Ola Electric, which this year launched several new lower-priced variants of its flagship S1 electric scooter model and also an upgraded version, already leads the EV scooter market in India, commanding about 35% of the market share. Its IPO is the first by a two-wheeler maker in the country in over 15 years.

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1. Ola Electric says in the DRHP:

We are highly dependent on the services and reputation of Bhavish Aggarwal, our Founder, Chairman and Managing Director, who has significant influence on our business plan. He is also the Chairman and Managing Director of ANI Technologies Private Limited and has recently founded a new startup, Krutrim SI Designs Private Limited. His involvement with ANI Technologies Private Limited and Krutrim SI Designs Private Limited may detract from the time that he is able to dedicate to our Company.

2. Ola Electric says:

We have entered into various transactions with ANI Technologies Private Limited (“ANI”) and its subsidiaries such as: (i) our sub-lease of the Corporate Office and Registered Office from ANI; (ii) our arrangement with ANI for the sale and advertisement of our EVs on their website and app; (iii) our arrangement with Ola Financial Services Private Limited, a subsidiary of ANI, for the distribution of insurance policies for our EVs; (iv) services provided by Geospoc Geospatial Services Private Limited, a subsidiary of ANI, which powers the Ola Maps navigation system on our MoveOS version 4 platform; and (v) our arrangement with Ola Fleet Technologies Private Limited, subsidiary of ANI, for the provision of packing, warehousing and logistics services in relation to the chargers and accessories that we sell. If we are unable to continue with such transactions with ANI and its subsidiaries in the future, there may be a negative impact on our business operations.

While we believe that all such transactions have been conducted on an arm’s length basis, we cannot assure you that we could not have achieved more favourable terms had such transactions not been entered into with related parties. It is likely that we may enter into related party transactions in the future. Although related party transactions that we may enter into post-listing would be subject to the Audit Committee, Board or Shareholder approval, as necessary under the Companies Act, 2013, and the SEBI Listing Regulations, we cannot assure you that our existing agreements and any such future transactions, will be in the interest of our Company and minority shareholders and in compliance with the SEBI Listing Regulations and individually or in the aggregate, will not have an adverse effect on our financial condition and results of operations. Furthermore, any future transactions with our related parties could potentially involve conflicts of interest which may be detrimental to our Company. There can be no assurance that we will be able to address such conflicts of interest in the future.