Ola Electric Mobility Ltd shares surged 16% on the BSE after hitting a record low of ₹46.32 earlier in the day, surprising investors. The stock rebounded sharply, climbing to ₹54.35, marking a 17.33% increase from its intraday low. The decline was triggered by concerns over an operational creditor of its subsidiary, Ola Electric Technologies, approaching the NCLT over an alleged payment default. Despite this, the stock showed strong recovery, indicating investor confidence.
Ola Electric has faced several challenges over the past three months, including slower-than-expected growth in the electric two-wheeler (e-2W) industry, a decline in market share, and delays in launching its motorcycle due to homologation issues. Additionally, profitability has been impacted by higher warranty costs. Despite cost-cutting measures aimed at improving profitability, Kotak Institutional Equities believes the expected sales volume will fall short of market expectations. The brokerage firm emphasized that the success of Ola’s motorcycle launch is critical for maintaining brand equity and long-term market share. Kotak has downgraded Ola Electric’s fair value from ₹65 to ₹50, a 23% reduction.
Ola Electric is also dealing with legal disputes. The company strongly refutes an alleged default claim made by Rosmerta Digital Services, which has filed a petition with the National Company Law Tribunal (NCLT) – Bengaluru Bench. Rosmerta claims Ola Electric Technologies failed to pay for services rendered and is seeking the initiation of the Corporate Insolvency Resolution Process (CIRP). Ola has stated that it will take all necessary legal measures to protect its interests and dispute the allegations.
Meanwhile, Ola Electric has been navigating industry-wide changes in the electric two-wheeler market. Data indicates that while year-on-year e-2W sales in February showed growth, month-on-month sales declined. However, Ola Electric managed to gain the most market share, followed by Bajaj Auto and Hero MotoCorp. TVS, in contrast, passed on its Production-Linked Incentive (PLI) benefits to customers by lowering prices on its EV models. BNP Paribas noted that the competitive dynamics in the industry remain strong.
To boost sales, Ola Electric recently announced discounts on its scooters. The S1 Air saw price cuts of up to ₹26,750, while the S1 X+ (Gen 2) was discounted by ₹22,000, bringing their starting prices to ₹89,999 and ₹82,999, respectively. Additionally, discounts of up to ₹25,000 were applied to Ola’s entire S1 Gen 3 scooter lineup.
Kotak Institutional Equities expects the e-2W industry to grow at a compound annual growth rate (CAGR) of 31% between FY24 and FY27, lower than the previous projection of 40%. The firm attributes this slowdown to the weaker brand equity of new-age original equipment manufacturers (OEMs) and the cautious approach of established players in launching new models to protect their margins.
Ola Electric anticipates reaching EBITDA breakeven by the June quarter, supported by its cost-cutting and network transformation initiatives. The company has reduced monthly operating expenses by ₹90 crore through reductions in service and warranty costs, headcount optimization, and network transformation. Kotak suggests Ola may pass on some of these cost savings to consumers to drive sales and gain market share.