Has Ola Electric Turned The Corner?

After months of sputtering in neutral, Ola Electric seems to have found its ignition key again — the bulls are now driving the stock. On the back of a positive auto industry sentiment and the PLI scheme boost, it touched a seven-month high at INR 69 last week.

But the Bhavish Aggarwal-led company’s growth story always has a catch. Following a dramatic rise earlier in the week, Ola Electric shares nosedived again to settle at around INR 60 as investors started booking profits and none other than SoftBank offloaded a part of its stake in the EV company.

What exactly is happening at Ola Electric these days?

After a largely negative June quarter results, how did the EV poster boy start garnering back the attention of the public market investors? After all, accounting for the 13% slump in its shares in the last two sessions, Ola still witnessed a 33% jump in two weeks.

Well, the experts say, it’s once again the magic of its announcements, plus some policy push. The market is quite upbeat about its indigenously developed 4680 battery cell, the rare-earth-free motors, and the company’s Gen3 scooter lineup getting the certification for the PLI scheme.

Besides, we shouldn’t overlook that the BSE Auto index was also up over 5% last week amid GST rationalisation — EVs retained 5% GST rate and GST on ICE two-wheelers up to 350cc, small passenger cars got a rate cut to 18% from 28%. Ahead of the festive season, the new GST rates were a respite for the electric and ICE auto sectors alike.

But before looking at the macroeconomic factors, let’s take a few steps back.

What Has Changed Lately For Ola Electric?

On August 15, which has been a happening day for Ola Electric over the past few years with its flagship annual event Sankalp, the company dropped a new electric scooter model – S1 Pro Sport. A big highlight of the new model was that it would be equipped with ferrite magnet motors and the 4680 battery cells — both developed in-house.

Why are these two big promises? It shows that while the auto industry has been sweating over India’s rare earth magnet crunch, Ola Electric has already taken a step ahead.

Sure, the company did announce earlier this year as well that a rare-earth-free motor was in the making, but let’s be honest, at this point, D-Street doesn’t want more “announcements,”it wants “execution”. Clearly, with Aggarwal reiterating the matter, it did reinforce the trust of investors and analysts alike.

The same playbook of lowering China dependency and building more indigenous products worked for its homegrown battery tech, too — a development that quickly helped shift sentiment in its favour.

Right after this, the shares started their bullish movement, which further picked up from August 26 when Ola revealed that its Gen 3 scooters will now qualify for incentives ranging from 13-18% under the Centre’s PLI scheme. This essentially means its scooters will get cheaper with the government backing in place.

“Once a proper vertical integration is in place, Ola will see better margins going forward. It will also be able to compete better with Ather Energy,” said Shruti Jain, chief strategy officer at Arihant Capital Markets.

She told Inc42 that if the stocks of Ola Electric and Ather have to be compared shoulder-to-shoulder at this point, the brokerage platform prefers the former over its competitor because of its vertical integration capabilities and PLI benefits that Ather doesn’t have.

The consensus is almost the same on the stock exchanges. Even as analysts see further profit booking in the near term, the PLI scheme and its margin expansion capabilities will act as a cushion in the medium term.

‘GST Relief’ For EV Players

In the last week alone, Ola Electric shares rallied 27% in the first three sessions, but later they fell due to a massive profit booking, making the gains only about 11% overall.

Even competitor Ather Energy saw a steady rise of over 10% on the bourses in the week, except that it did not see a massive slump. This rise was also catalysed by the launch of its next-generation EL platform.

The EV industry has been quite bullish on the GST expectations, however, ultimately the GST Council retained the 5% GST for EVs. In the case of traditional petrol cars, there has been a reduction. However, some sections of the EV industry feared higher taxes, which didn’t come to be and was a big relief for EV players.

Ather and Ola Electric’s rise last week can be attributed to this broader market sentiment, besides the other business-specific factors.

Analysts are optimistic that this festive sales season will be another push for the EV makers and auto industry in general. Besides the GST rationalisation, China lifting the curb on rare earth minerals is a positive for the entire supply chain. However, can the reduction in ICE prices hurt EV sales now? Well, Ola might have bigger things to worry about.

At this point, when TVS Motor and Bajaj Auto have already raced past and Ather is also catching up, the biggest bottleneck for Ola remains in increasing its sales volume compared to its EV peers.

And, on the markets side, its biggest risk is large investor exits.

Bright Days Ahead For Bhavish & Co?

“The recent sharp correction highlights how investors are locking in gains after the swift run-up,” highlighted Sourav Choudhary, MD of Raghunath Capital.

Notably, its Japanese investor SoftBank has sold 9.4 Cr equity shares via SVF II Ostrich (DE) LLC, in the company between July 15 and September 2, which was a major trigger point for the slump Ola Electric saw later in the week.

Foreign companies are one of the biggest shareholders at the Aggarwal-led EV startup, led by SVF II Ostrich, which alone held 17.83% stake in the June quarter end of the total 30.19% held by the broader category that has Tiger Global, Alpha Wave, among others. In the quarter ended March, this shareholding was at 35.13%, which is expected to go further down in the September quarter with SoftBank dumping stocks.

One may ask if early investors are losing faith? Perhaps not, but at least they are trying to book profits in time, given that Ola Electric’s shares have already trailed significantly compared to its IPO price.

So, while the fundamentals also remain sticky, Ola Electric has multi-layered challenges to deal with in the coming days.

Technical charts also suggest more pain in the short term. Jigar Patel, senior manager of equity research at Anand Rathi, sees a deeper correction in the stock in the next 7-10 days till the INR 54-55 level. “If a buying trend starts after that, it might rise again to the INR 72-73 level. We recommend a profit booking at this point, not short selling, though.”

Meanwhile, a fresh headache has appeared. Ola Electric’s auditors flagged ‘material weakness’ in scooter verification at stores and state distribution centres, plus a “suspected” employee fraud worth over INR 1 Cr in FY25.

So, what happens next week? Expect the stock to react to these new red flags, but the impact may not be as deep as the past.

It goes without saying that today, Ola Electric has everything in its favour — capital, policy, infrastructure, and market demand. What it doesn’t have (yet) is the one thing public market investors prize most: robust corporate governance.

The question is, can Bhavish Aggarwal & Co course-correct before the momentum it has now gained slips away?

Markets Watch: Upcoming Issues, Results & More

• BlueStone Narrows Loss: The jewellery brand posted a 41% on-year decline in its consolidated net loss to INR 34.7 Cr in Q1 FY26, while its operating revenue jumped 42% to INR 492.7 Cr.
• Urban Company IPO: The IPO of the consumer services unicorn will open next week on Wednesday (September 10) and close on September 12. Its price band is set at INR 98-INR 103.

• DevX IPO: The coworking space provider’s IPO will also open on September 10 and close on September 12. Its price band is set at INR 56 to INR 61.
• BoAt’s Profitable FY25: IPO-bound consumer electronics startup boAt posted a net profit of INR 60.4 Cr on an INR 3,073.3 Cr revenue.
• Investor Ditches MobiKwik Shares: Abu Dhabi Investment Authority (ADIA) has offloaded its entire 2.1% stake, comprising 16.44 Lakh shares, in the fintech company.

[Edited By Nikhil Subramaniam]

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