Ola Electric share price has imploded after its initial public offering (IPO) in which the company raised $734 million from retail and institutional investors. The stock was trading at ₹53.50 on Thursday, the same range it has been in the past few days, and a few points above the year-to-date low of ₹45.7. This report explores whether the Ola stock will recover.
Why the Ola Electric share price has plunged
The Ola Electric stock price has declined significantly over the past few months, dropping from a high of ₹157.32 in August last year to ₹53.55.
It has crashed after reports that the company moved from one crisis to another in the past few months.
Data shows that sales of its electric motorcycles and scooters has crashed as competition from established brands like TVS and Bajaj soared. It also faced substantial customer complaints about its products.
The most recent numbers showed that its electric bike registrations fell by 74% in February to just 8,647. This slowdown is likely to continue this year, as reports indicate that the company is closing some of its stores.
Ola Electric’s losses have continued growing, with a path towards profitability remaining murky. At the same time, the firm has faced some regulatory issues, especially because of the rising consumer complains, and for violating India’s Motor Vehicles Act.
Read more: Ola Electric’s $734 million IPO: 2024’s largest in India—Should you invest?
Finances have deteriorated
Official statements from Ola Electric showed that its deliveries in Q3’FY25 dropped to 84,029 from 86,775 a year earlier.
Its premium bikes sales dropped from 83,396 to 29,283. This decline was offset by the mass market bikes, whose sales rose from 3,379 to 54,746.
This slowdown led to a significant decline in its automotive revenue and profitability. Its sales dropped from ₹1,336Cr to ₹1,075 Cr, while its earnings before interest tax, depreciation, and amortization worsened to ₹309 Cr.
The consolidated revenue dropped to ₹1,069 Cr, while the EBITDA was a significant loss of ₹436 Cr.
Ola Electric is addressing these issues by investing in its servicing locations and expanding its portfolio. It has increased its products offerings to 14, and has entered the motorcycle industry, which it hopes will help it boost sales.
The company is also working to expand its distribution network through its own stores and other distributors. Additionally, its restructuring has enabled it to save approximately $10 million per month. It recently laid off 1,000 employees as losses jumped.
Will the Ola Electric share price recover?
Ola Electric, which sought to be the two-wheeler equivalent to Tesla, is facing a mountain of challenges. Cash burn is accelerating, and analysts believe that its goal of selling 50,000 products a month is not achievable.
The biggest concern is that its reputation is damaged, which will lead to more pressure as competition from established brands rose. Most importantly, this competition will always affect its margins as it has been forced to offer discounts.
Ola Electric is facing the same challenges that Tesla is going through. Tesla’s results showed that its profits plunged by over 70% in the first quarter as competition worsens.
Ola stock chart by TradingView
The daily chart shows that the Ola Electric stock price bottomed at ₹45.72, where it formed a double-bottom, a highly popular bullish sign. There are signs that it has formed a falling wedge, comprising of two falling and converging trendlines.
It has already moved above the upper side of the wedge. Therefore, while its fundamentals are fairly weak, there is a likelihood that the stock will bounce back, and possibly hit the key resistance at ₹67, the lowest swing in December last year.
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