The Rs 6,145 crore initial public offering (IPO) of electric two-wheeler company Ola Electric Mobility was fully subscribed by the second day of bidding on Monday. The IPO attracted strong demand from both retail and non-institutional investors, indicating a positive market reception.
Subscription Details
According to data from the National Stock Exchange (NSE), the IPO received bids for 49,43,63,610 shares against the 46,51,59,451 shares on offer, translating to a 1.06 times subscription. This shows a strong interest in the IPO, surpassing the number of shares available.
Retail Individual Investors (RIIs): The retail segment saw a robust response, with a 2.87 times subscription. This indicates that small individual investors are highly optimistic about the future prospects of Ola Electric.
Non-Institutional Investors: The non-institutional segment received 1.11 times the subscription. This category includes high-net-worth individuals and other entities that are not classified as institutional investors.
Qualified Institutional Buyers (QIBs): QIBs accounted for 40 percent of the subscriptions in their segment. These include entities like mutual funds, banks, and insurance companies, which typically have significant financial resources and analytical capabilities.
IPO Structure
The IPO consists of two components:
- Fresh Issue: Up to Rs 5,500 crore.
- Offer for Sale (OFS): Up to 8,49,41,997 equity shares. The OFS includes the sale of about 38 million shares by Ola Electric founder Bhavish Aggarwal.
The price band for the issue is set at Rs 72-76 per share, and the IPO is open for subscription until August 6.
Purpose of the IPO
The proceeds from the IPO will be used for several strategic initiatives to bolster Ola Electric's growth and operational capacity.
Expansion of Cell Manufacturing Capacity: Ola Electric plans to allocate Rs 1,227.6 crore from the fresh issue to expand its cell generation plant capacity from 5 GWh to 6.4 GWh. This expansion is critical for meeting the growing demand for electric vehicles and ensuring a stable supply of battery cells.
Research and Development: The company aims to invest Rs 1,600 crore in research and product development. This investment will support the development of new technologies and products, keeping Ola Electric at the forefront of the electric vehicle industry.
Debt Repayment: Rs 800 crore of the proceeds will be used to repay existing debts, thereby improving the company's financial health and reducing interest expenses.
Organic Growth Initiatives: Rs 350 crore will be dedicated to organic growth initiatives. These initiatives may include expanding the company's market presence, enhancing production capabilities, and improving overall operational efficiency.
Funding the Ola Gigafactory
In its Red Herring Prospectus (RHP), Ola Electric Mobility Ltd (OEML) outlined plans for the phased setup and expansion of the Ola Gigafactory in the Krishnagiri district of Tamil Nadu. This project will be funded through internal accruals and long-term debt obtained by its subsidiary, Ola Cell Technologies Pvt Ltd (OCT). Part of the IPO proceeds will finance capital expenditures by OCT to expand cell generation plant capacity.
Anchor Investors
Prior to the IPO, Ola Electric raised Rs 2,763 crore from anchor investors. These investors include prominent names such as SBI Mutual Fund (MF), HDFC MF, Nippon India MF, Bharti Axa Life Insurance Company, Kotak Mahindra Life Insurance Company, Nomura India Investment Fund, Goldman Sachs (Singapore) Pvt Ltd, and Fidelity. The participation of these anchor investors indicates strong institutional confidence in Ola Electric's business model and growth prospects.
Conclusion
The successful subscription of Ola Electric's IPO, particularly the strong response from retail investors, underscores the market's confidence in the company's vision and growth strategy. The funds raised will provide Ola Electric with the necessary capital to expand its manufacturing capacity, invest in new technologies, and strengthen its market position in the rapidly growing electric vehicle industry.