Ola Electric, Exicom, Ather: Inside India’s ‘charged-up’ EV IPO run

Ola Electric, India’s largest two-wheeler electric vehicle maker has received the approval from India securities’ market regulator- Securities Exchange Board of India (Sebi) to go public. 

The Bhavish Agarwal-led company will raise Rs 5,500 crore through a fresh issue, apart from an offer-for-sale (OFS) component of 95.2 million shares, and is likely to list its shares later this year.

The Bengaluru-headquartered startup is reportedly eyeing a $6 billion valuation and will be the first EV startup in the country to list itself on the bourses. 

According to the draft IPO papers, a part of the proceeds from listing will be used for expanding capacity at the company’s cell manufacturing plant- Ola Gigafactory- to 6.4 GWh (gigawatt hours) from 5GWH. 

However, beyond this development, Ola Electric’s move to go public underscores the upbeat investor sentiment about the electric vehicle infrastructure in India.

Exicom Tele-System’s IPO lifts spirits, Ather IPO on the horizon

Before Ola Electric, Exicom Tele-System- India’s largest EV charging and critical power solutions manufacturer made a splash earlier this year for a successful IPO. 

Exicom’s listing in March witnessed an impressive 86% surge in share price and since then, up till June 20, its share price has increased by 72%. 

The Hero Motocorp-backed Ather Energy which competes with Ola Electric in the electric two-wheeler segment is also planning an IPO by next year, looking to reportedly raise around $400 million and eyeing a valuation of $2 billion.

Crucially, the investment into the company by Nikhil Kamath, co-founder of the India’s largest stock broking platform Zerodha, and an experienced investor, has also come as a vote of confidence, not only in the company’s growth prospects, but in the growth trajectory of the Indian EV industry as a whole.

The company recently launched a first of its kind electric 2W Rizta-a ‘family’ electric scooter in what could potentially double its sales volume, according to Motilal Oswal Financial Services.

Ather currently holds a market share of 11-12%, but is eyeing to more than double its market share to around 30% by the end of this fiscal, and Rizta could play a significant role in achieving that target. 

What is driving investor confidence in Indian EV companies

Make no mistake, EVs currently account for only 2% of the overall passenger vehicles in India, but its sales is growing fast.

In 2023, EV sales nearly doubled, exceeding the overall sales of PVs which grew 10% year-on-year.

While climate change, pollution and a simultaneous call to shifting to more sustainable means of transportation present a strong use case for EVs, its adoption in India is marred by the high upfront cost, weak public charging infrastructure, and some safety concerns.

The government, however is committed to changing the scenario and has set a target of having 80% electric 2Ws by 2030, 70% commercial vehicles, and 30% private cars. 

To spur demand, India has been running the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India or the FAME India scheme since 2015 under which incentives are provided to buyers of electric vehicles in the form of an upfront reduction in the purchase price of the vehicles. 

The second iteration of the scheme which was launched in 2019 received an outlay of Rs 11,500 crore and until February this year, the government had achieved 79% of its target for the number of EVs-  two, three and four, that it set out to support under it. 

GST on electric vehicles has also been reduced from 12% to 5% while GST on chargers/ charging stations for electric vehicles has been reduced from 18% to 5%

On the supply side, the Production Linked Incentive (PLI) scheme for automobile and auto components provides financial incentives to boost domestic manufacturing of advanced automotive technology products, including EVs and and their components.

Under the larger EV PV segment, it is in fact, the two-wheelers which are showing the way. Electric 2W sales surged by 33.3% in 2023-24. 

Stocks to could benefit from Ola Electric and Ather IPOs:

According to Equitymaster- an India-based equity research and analysis portal, at least four stocks could benefit indirectly from the IPOs of Ola Electric and Ather. These are:

• Hero Motocorp, as it holds a 39.7% stake in Ather Energy. 
• Sona BLW Precision Forgings, which is an auto component supplier to Ola Electric as well as Hero Electric. At the end of FY24, the company’s orderbook was Rs 226 billion out of which 79% was from the electric vehicle segment.
• Fiem Industries, which is the sole supplier to Ola electric for headlamps, tail lamps, indicators, rear fender assemblies, and mirrors.
• Minda Corporation, which supplies auto components to a variety of electric two-wheeler makers including Ola electric and Ather Energy.

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