Shares of Ola Electric Mobility, India’s leading two-wheeler electric vehicle (EV) manufacturer, staged a strong rebound on Tuesday, March 18, after hitting a record low in the previous trading session. The stock surged 15% to ₹53.80 per share, lifting the company’s market capitalization back above ₹20,000 crore. This recovery comes after a tumultuous period marked by legal challenges, declining market share, and profitability concerns. But the question remains: Can this rally sustain, or is it a temporary bounce?
Key Highlights of Ola Electric’s Recovery
| Metric | Details |
|---|---|
| Stock Price Recovery | 15% rebound to ₹53.80 per share |
| Market Cap | Crossed ₹20,000 crore after recovery |
| Previous Low | Stock hit a record low on Monday, March 17, falling 7% |
| Legal Challenge | Creditor filed a winding-up petition against Ola Electric Technologies |
| Industry Challenges | Slower EV 2W growth, market share loss, delayed motorcycle launch |
| Brokerage View | Kotak Institutional Equities retains ‘Reduce’ rating, lowers target to ₹50 |
What Triggered the Record Low?
Ola Electric’s shares had plunged 7% on Monday, March 17, after one of its unit’s creditors, Rosmerta Digital Services, filed a petition in court alleging a payment default by Ola Ola Electric Mobility is the sole owner of Electric Technologies. The creditor claims that the subsidiary defaulted on payments for services rendered and is seeking the initiation of a winding-up petition.
Ola Electric has strongly disputed these claims and is seeking legal advice. However, the petition added to the company’s existing challenges, including:
- Slower-than-expected growth in the EV two-wheeler (2W) industry.
- Loss of market share in the EV 2W segment.
- Delays in the launch of its motorcycle due to homologation issues.
- Profitability concerns due to higher warranty-related costs. Read More
Broader Industry Challenges
The EV 2W industry in India is facing significant headwinds, which have impacted Ola Electric’s performance. According to Kotak Institutional Equities, the demand for electric two-wheelers has moderated sharply after the festive season. Key factors include:
- Weakened consumer sentiment.
- Limited or lackluster launches by original equipment manufacturers (OEMs).
- Rising financing rates.
- Demand saturation among early adopters.
Additionally, subsidies on electric two-wheelers are expected to drop to a maximum of ₹5,000 per unit from the current ₹10,000, which could lead to higher upfront costs for consumers unless OEMs absorb the impact.
Ola Electric’s Financial Outlook
While Ola Electric faces near-term challenges, analysts expect profitability to improve in the coming quarters. Key factors driving this optimism include:
- Cost-cutting initiatives.
- Shift toward the Gen-3 platform, which lowers the bill of materials (BOM).
- Reversal of one-time expenses, such as warranty costs.
However, Kotak Institutional Equities has reduced its revenue assumptions for Ola Electric by 2-15% for FY2025-27E, citing lower growth expectations for the EV 2W industry and delays in motorcycle launches. The brokerage has also lowered its target price for the stock to ₹50 per share from ₹65, retaining its ‘Reduce’ rating.
Can the Rally Sustain?
The recent rebound in Ola Electric’s stock price is a positive sign, but sustaining this rally will depend on several factors:
- Resolution of Legal Issues: A swift resolution of the winding-up petition and other legal challenges will be crucial for restoring investor confidence.
- Motorcycle Launch: The successful launch of Ola’s motorcycle, which has been delayed due to homologation issues, could provide a significant boost to revenues.
- Gigafactory Ramp-Up: The company’s ability to ramp up production at its Gigafactory will be critical for meeting demand and improving margins.
- Industry Growth: A revival in the EV 2W industry’s growth trajectory, driven by new model launches and improved consumer sentiment, will be essential for Ola Electric’s long-term success.
Analyst Views and Recommendations
| Brokerage Firm | Rating | Target Price | Key Insights |
|---|---|---|---|
| Kotak Institutional Equities | Reduce | ₹50 | Lowered revenue assumptions, expects profitability improvement from FY2026E |
| Other Analysts | Mixed | – | Better-than-expected motorcycle performance and Gigafactory ramp-up are key risks |
Key Risks and Opportunities
Risks:
- Legal Challenges: The winding-up petition and other legal issues could weigh on investor sentiment.
- Market Share Loss: Ola Electric faces stiff competition from established players and new entrants in the EV 2W segment.
- Profitability Concerns: Higher warranty-related costs and delays in product launches could impact margins.
Opportunities:
- Cost-Cutting Initiatives: Successful implementation of cost-cutting measures could improve profitability.
- New Product Launches: The launch of Ola’s motorcycle and other new models could drive revenue growth.
- Gigafactory Expansion: Scaling up production at the Gigafactory could enhance operational efficiency and margins.
Conclusion
Ola Electric’s 15% rebound is a welcome relief for investors, but the road ahead remains challenging. While the company is taking steps to improve profitability and address operational issues, the broader industry slowdown and legal challenges pose significant risks.
Investors should closely monitor the company’s ability to resolve legal disputes, launch new products, and ramp up production at its Gigafactory. For now, analysts remain cautious, with Kotak Institutional Equities retaining its ‘Reduce’ rating and lowering the target price to ₹50 per share.
