Shares of Ola Electric Mobility surged 20% in their first trade in Mumbai on Friday, valuing the company at $4.8 billion, as investors bet on growing adoption of electric vehicles in the world’s largest two-wheeler market.
The stock’s initial public offering (IPO) price was flat at Rs 76 before rising 1 per cent to Rs 91.20 on the broader market.
Ola Electric’s $734 million IPO is India’s largest initial public offering in 2024 so far. The company is a leader in India, where adoption of electric vehicles remains low but is rising as Prime Minister Narendra Modi’s government promotes clean energy.
Analysts said improving sentiment on the stock market also helped fuel the rally. The Nifty 50 index has rebounded about 1.3% in four sessions after plunging 2.7% on Monday on worries about a U.S. recession.
“While demand was much lower than market expectations, Ola’s listing price was much higher than market expectations, which can be attributed to market sentiment,” said Prashanth Tapse, senior vice president of research at Mehta Equities.
With a 39% market share as of July, Ola Electric dominates electric scooter sales in India, having launched its first model just three years ago.
Investors are also optimistic about Ola Electric’s entry into the motorcycle market, which accounts for two-thirds of India’s two-wheeler market, analysts said. The company is expected to launch its range of electric motorcycles next week.
Varun Baxi, chief analyst for institutional equities at Nirmal Bang, said: “The flat opening seems to have encouraged investors who were not allotted shares in the IPO to come in and they seem to be optimistic about the launch of Ola motorcycles.”
However, despite surging revenue, Ola is yet to become profitable. In the year to the end of March, the company’s sales increased by 90% year-on-year, but its losses expanded by 8%.
“Our focus will be on achieving profitable growth so that investors also feel that there is a long-term profitability journey here as well,” Ola Electric founder Bhavish Aggarwal told CNBC-TV18 after ringing the bell at the NSE stock exchange on Friday.
The company will receive about $660 million in IPO proceeds, most of which it plans to invest in research and development and its battery manufacturing unit.
Ola Electric is pinning its profitability on making batteries for its scooters, which should make them cheaper. The company aims to achieve commercial production of batteries by early 2025.
“Ola Electric is in a very aggressive growth phase… we are investing for future growth,” Agarwal said.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
