(Bloomberg) — Shares of Ola Electric Mobility Ltd. rose in their debut in Mumbai on Friday, supported by strong investor demand amid the country’s growing adoption of electric vehicles.
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Shares of India’s largest electric scooter maker closed 20% higher at the maximum allowable limit of Rs 91.20, above the initial public offering price of Rs 76 apiece.
Backed by SoftBank Group Corp. and Tiger Global Management LLC, Ola’s IPO raised about $733 million, the country’s biggest since India’s state-owned Life Insurance Corp sold shares for $2.7 billion in 2022. It is also the first listing of a major car manufacturer since Maruti Suzuki. India Ltd. debut in 2003.
The flat opening likely encouraged some investors to buy shares, said Shifara Samsudeen, an analyst at LightStream Research. While some investors remain concerned about Ola Electric’s finances, those who are optimistic about the company’s prospects would have bought the shares, she added.
New stock sales in the country have raised $6.5 billion so far this year, more than double the amount from the same period a year ago but below levels seen in 2021, according to data compiled by Bloomberg.
Ola’s listing adds to India’s busy IPO market. The company went ahead with the offering despite the turbulence seen in global markets earlier this week. The IPO attracted anchor investors including funds linked to Nomura Holdings Inc., Fidelity International Ltd. and SBI Mutual Fund. The business received 4.3 times the demand.
“Ola’s debut indicates that sentiment remains strong for Indian IPOs, especially when we have many large IPOs in the pipeline and the market has overcome recent jitters,” said Aditya Kondawar, vice-president at Complete Circle Capital Pvt.
At the IPO price, Ola is valued at $4 billion. That’s a steep discount for the loss-making company that is seeking a potential valuation of up to $7 billion before facing investor resistance, Bloomberg News reported earlier this year.
Founded in 2017, the company also manufactures components for electric vehicles, such as batteries, motors and vehicle structures. It became a unicorn just two years later, without having shipped a single scooter. The company also encountered some early stumbles, such as when its scooters were caught in a spate of electric vehicle battery fires across the country.
The company has been incurring losses and negative cash flows from operations since inception, according to its listing document. The company posted a loss of 15.8 billion rupees ($189 million) in the year ended March 31.
Ola will be the lowest-cost electric two-wheeler manufacturer in India due to its scale that includes production-linked incentive benefits and will be able to break even in the next two years, Annamalai Jayaraj, analyst at Batlivala & Karani Securities Pvt. in Mumbai, he wrote in a note.
Axis Capital, BofA Securities, BOB Capital Markets, Citigroup Global Markets India, Goldman Sachs (India) Securities, ICICI Securities, Kotak Mahindra Capital, SBI Capital Markets are the lead book managers for the IPO.
(Updates stock price at close.)
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