India's Ola Electric surges 20% on debut on EV optimism

By Nandan Mandayam

BENGALURU (Reuters) - Ola Electric Mobility's shares surged 20% on their trading debut in Mumbai on Friday, valuing the company at $4.8 billion, as investors bet on increasing adoption of electric vehicles in the world's largest market for two-wheelers.

The stock had listed flat to its initial public offering (IPO) price of 76 rupees before rising to 91.20 rupees in a broader market that was up 1%.

Ola Electric's $734 million IPO is India's biggest so far in 2024. The company is the leading player in a country where adoption of EVs is still low, but rising, as Prime Minister Narendra Modi's government promotes clean energy.

Improving sentiment in the stock market also helped drive gains, analysts said. The Nifty 50 has rebounded about 1.3% in four sessions after plunging 2.7% on Monday amid U.S. recession worries.

"Despite receiving demand well below street expectation, Ola listed well above street expectations, which can be attributed to market mood," said Prashanth Tapse, senior vice president of research at Mehta Equities.

With a 39% market share as of July, Ola Electric dominates sales of electric scooters in India, having launched its first model just three years ago.

Analysts said investors were also optimistic about Ola Electric's foray into motorcycles, that account for two-thirds of India's two-wheeler market. The company is expected to launch its range of electric motorcycles next week.

"The flat opening seems to have encouraged investors who weren't allotted shares in the IPO to hop on, and they seem to be optimistic of Ola's motorcycle launch," said Varun Baxi, lead analyst at Nirmal Bang Institutional Equities.

However, while Ola's revenues have soared, it is yet to turn a profit. In the year to the end of March, the company's sales rose 90% year-on-year, but losses widened 8%.

"Our focus will be to build profitable growth for investors to also feel that there is a long term profitability journey here also," Ola Electric's founder Bhavish Aggarwal told CNBC-TV18 on Friday after ringing the bell at the NSE stock exchange.

The company, which will get about $660 million in IPO proceeds, plans to invest most of that into research and development and its battery cell manufacturing unit.

Ola Electric has pinned its profitability on manufacturing its own battery cells for its scooters, which should make them more affordable. It is targeting commercial production of the battery cells by early 2025.

"Ola Electric is in a very aggressive growth phase ... where we are investing for future growth," Aggarwal said. (This story has been corrected to change the brokerage name to Nirmal Bang Institutional Equities, not Antique Stock Broking, in paragraph 8)

($1 = 83.8875 Indian rupees)

(Reporting by Nandan Mandayam in Bengaluru; Editing by Tom Hogue and Mark Potter)