Ola Electric, an electric vehicle (EV) manufacturer that began operations in December 2021, submitted its draft red herring prospectus (DRHP) to the Securities Exchange Board of India (SEBI), the market regulator, on December 22.
Since this is the first pure-play EV company to join the public markets, the initial public offering (IPO) of the EV maker is highly awaited.
The DRHP is a crucial document that provides investors with further information about the firm by illuminating its growth strategies, financial indicators, and potential external and internal risk factors. These are seven of Ola Electric’s DRHP’s highlights.
With a new equity share offering valued at ₹5,500 crore and an offer for sale (OFS) of up to 9.52 crore shares, Ola Electric intends to raise capital. 50% of the entire OFS, or 4.7 crore shares, would be sold through the IPO by Ola Electric promoter Bhavish Aggarwal.
Ola Electric stated in its DRHP that if the business exercises its option to raise ₹1,000 crore through pre-IPO placement, the size of the new issue will be lowered accordingly.
In addition to Bhavish Aggarwal, the other entities selling their holdings are Tekne Private Ventures XV, MacRitchie Investments, Matrix Partners India Investments, Alpine Opportunity Fund, DIG Investment Internet Fund, Indus Trust, and Kaha Wave Ventures.
The company discloses, among other noteworthy details, that it paid a penalty of ₹15 lakh to the MoRTH following the March 2022 burning of an S1 scooter in Pune.
The total debt or borrowings of Ola Electric increased from ₹39 crore in FY21 to ₹1,617 crore in FY24. The money from the initial public offering (IPO) would be used to pay back loans that Axis Bank and Bank of Baroda subsidiaries owe. Ola Electric wants to expand its gigafactory, EV portfolio, and sales with the money raised from its IPO.
The company warns that as it makes commercial investments and broadens its product line, it might continue to experience operating losses in the foreseeable future.
Ola Electric plans to use the ₹1,264 crore it received from the IPO as capital expenditure to increase the capacity of its Gigafactory. An additional ₹800 crore would go toward repaying debt, while ₹350 crore will support initiatives for organic growth. Over the following three years, ₹1,600 crore will be needed for research and development.
In November 2023, the company achieved its highest-ever sales of 30,000 units, resulting in a 35% market share. More than 300,000 cars have been sold since its December 2021 introduction. The company sold 9,841 e-scooters in December, and as of now in FY24, sales have exceeded 1.8 lakh vehicles.
From ₹373.42 crore in FY23 to ₹2,630.93 crore in FY24, the company’s revenue has increased.
Board of Directors members’ compensation:
Six directors make up the board, according to the DRHP: two non-executive directors, one executive director, and three independent directors, one of whom is a woman.
Aggarwal will serve as both the managing director and chairman. Arun Sarin and Krishnamurthy Venugopala Tenneti, who both serve on the board of ANI Technologies, are among the company’s non-executive directors. Sarin is also a board member of Accenture and other companies.
Aggarwal would get a base salary of Rs. 6 crore annually along with an additional Rs. 3 crore in variable remuneration. Non-executive and independent directors would receive an annual compensation of Rs 0.5 crore in addition to a Rs 1 lakh sitting fee.
Manoj Kohli, the former CEO of Airtel, Anant Sankaranarayana, the creator of Mensa Brands, and Shradha Sharma, the founder of YourStory Media, have been named as the company’s Independent Directors.
Directors who attend board meetings and committee meetings are paid a sitting fee per meeting.
Growth plan: Gigafactory and EV hub:
The business is constructing a Gigafactory to produce cells. Actually, a portion of the money obtained through the IPO will be used to expand the Gigafactory.
“We are building the Ola Gigafactory in Tamil Nadu’s Krishnagiri district to manufacture cells. By March 31, 2024, Phase I of the factory is anticipated to be operational, with a 1.4 GWh production capacity. By October 2024, we want to have finished phase 1 (b) and increased production to 5 GWh.
According to the DRHP, “The company is also constructing an EV hub in Tamil Nadu, which will include our Ola Future Factory for EV manufacturing, the upcoming Gigafactory, and co-located suppliers.