Two-wheeled vehicles are an integral part of life in India. They whizz over the country’s broken, clogged roads, carrying families and loads that would fill a small lorry. India manufactures about 20m of them each year, making it one of the world’s leading producers. It is fitting, then, that the country’s largest initial public offering (IPO) so far this year is for an electric-scooter company. On August 2nd Ola Electric plans to sell around $730m of shares at a price that will value the firm at roughly $4bn.
Ola Electric has been on a fast but bumpy ride since it began churning out battery-powered scooters in 2021. Mechanical troubles early on led to fires and breakdowns. The company has now resolved those manufacturing problems, and is the leading maker of the vehicles in India. Yet it lost $190m in its most recent fiscal year, 8% more (in rupees) than its loss in the previous year. It sold 330,000 scooters at an average price of $1,800—and an average loss of $573. Although that is an improvement, of sorts, on the 156,000 scooters sold at an average loss in excess of $1,100 in the previous year, profits appear to be some distance away.
The $4bn valuation at which the company will list is significantly below the $5.4bn valuation it received in September during its last venture-funding round. Bhavish Aggarwal, Ola Electric’s founder, claimed, implausibly, that he wanted to make sure that the IPO was priced “attractively for the entire investor community in India”. The company’s reduced valuation will be disappointing for some recent investors, but is hardly a rarity in India these days. Valuations among Indian startups have plummeted owing to rising interest rates. Ola Cabs, the ride-hailing service from which Ola Electric was spun off, was valued at $7.3bn in 2021. It has since suspended its planned listing, sacked employees and closed overseas operations.
Ola Electric, though, is raising money to do more than just keep its engine running. Of the funds it raises, $191m will be used for research and development and $147m for capital equipment, primarily to bring the production of batteries in-house. A planned electric car has been put on hold, but new electric motorcycles are scheduled to be introduced in 2025.
Analysts are bullish about the outlook for two-wheelers in India. According to one presentation accompanying Ola Electric’s offering, annual sales in the country are expected to rise to 13m units by 2028, up from around 700,000 today. But pot holes still lie ahead. In recent months the government has cut subsidies for electric vehicles, leading to a slowdown in growth. And even if electric scooters continue to spread across the country, there will be stiff competition from domestic rivals such as TVS and Bajaj, which have excellent reputations and deep pockets.
On the bright side, one usual group of competitors—Chinese companies—has struggled to keep up with domestic firms. Part of the explanation may be regulations in the Chinese market which, for perhaps understandable reasons, cap the speed at which its two-wheelers can travel. India has no such restraints. Ola Electric’s two-wheelers can reach a zippy 120kph. They have a range of 150km, to boot.
For now, it looks as though investors in India’s public markets are happy to go along with Ola Electric for a ride. Interest in the IPO is reportedly high. In recent days, in anticipation of the listing, videos have circulated on social media of partially submerged Olas speeding through flooded Indian streets. That is an impressive achievement—though, given the brevity of the clips, it is unclear whether the riders successfully make it to their destinations. Investors in the scooter-maker may be taking a similar plunge. ■
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