Ola Electric likely to drive in IPO at a lower valuation of $4.5 billion

Ola Electric, the SoftBank-backed electric vehicle (EV) maker, is likely to pursue a valuation of approximately $4.5 billion in its upcoming initial public offering (IPO), marking about 18 per cent decrease from its last funding round valuation of around $5.5 billion, according to industry sources.

The Bhavish Aggarwal-founded firm aims to file for the IPO by next month, according to people familiar with the matter.

“The strategy is to price the IPO attractively for investors, fostering long-term growth and wealth creation,” said a source.

When contacted, the company declined to comment.

June 20, Ola Electric received approval from the Securities and Exchange Board of India (Sebi) to proceed with its IPO plans, with the goal of raising Rs 7,250 crore (around $860 million).

This nod set the stage for Ola Electric to become the first Indian electric vehicle company to go public.

In October last year, Ola Electric announced it had secured approximately Rs 3,200 crore ($380 million) in funding as part of an equity and debt round.

The funding was obtained from Temasek-led marquee investors and project debt from State Bank of India, raising its valuation to $5.5 billion from a previous $5 billion, the sources said.

However, this valuation is expected to have declined because of shifts in global tech stock valuations.

The funds raised in October last year were intended as a precursor to the IPO, with Aggarwal targeting a $6 billion valuation for the offering.

Aggarwal plans to sell up to 47.4 million shares, representing a 3.48 per cent stake, in the IPO.

Other selling shareholders include Indus Trust, Alpine Opportunity Fund, DIG Investment, Internet Fund III (Tiger Global), MacRitchie Investments, Matrix Partners, SoftBank Vision Fund, Alpha Wave Ventures, and Tekne Private Ventures.

The draft red herring prospectus (DRHP) details the allocation of proceeds from the fresh issue: Rs 1,226 crore towards capital expenditure (capex), Rs 800 crore for debt repayment, Rs 1,600 crore for research and development (R&D), and Rs 350 crore for organic growth initiatives.

Ola Electric manufactures EVs and key components, such as battery packs, motors, and vehicle frames at its Futurefactory in Tamil Nadu, which is being expanded to become the world’s largest two-wheeler factory with an annual production capacity of 10 million units.

Additionally, it has established a Gigafactory for Li-ion cell manufacturing in Tamil Nadu, initially with a capacity of 5 gigawatt hours (GWh), which, according to the sources, will scale up to 100 GWh in phases.

The company also operates a Battery Innovation Centre (BIC) in Bengaluru, equipped with state-of-the-art laboratory equipment for comprehensive cell-related research and development.