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Ola Electric Mobility Ltd. has taken the stock market by storm, with its share price skyrocketing since its IPO. Initially priced at Rs 76, the stock has soared by an impressive 107% in just seven trading sessions. This rapid rise has pushed Ola’s market valuation to over Rs 66,000 crore, making it more expensive than even Tesla, a global leader in electric vehicles (EVs).
But what’s driving this surge, and what does it mean for investors? Let’s dive in.
The Meteoric Rise of Ola Electric’s Stock
Ola Electric’s shares have taken an upward trajectory, capturing the attention of investors. On August 20th, the stock saw another 8% jump, hitting a new peak of Rs 157.53 on the Bombay Stock Exchange (BSE). During the same session, a significant deal involving 2.3 crore shares, equivalent to 0.5% of the company’s equity, was executed at an average price of Rs 151 per share. The transaction valued the shares at Rs 352.9 crore.
This surge has led to Ola’s market cap surpassing that of Tesla, with Ola trading at 7.8 times its EV/sales ratio, compared to Tesla’s 6.8 times. However, this rapid growth comes with a note of caution from analysts.
Analysts Advise Caution: High Valuation and Volatility
Despite Ola’s impressive rally, experts advise investors to proceed cautiously. The company is still encountering ongoing losses, and the stock price has been highly volatile. While Ola’s growth in the Indian EV market is promising, the high valuation and uncertain financial performance suggest that new investors should be careful.
What Should New Investors Do?
For those considering buying into Ola Electric, the recommendation is to wait for a more stable entry point. The stock’s high valuation and potential volatility make it a high-risk investment. However, for those with a long-term outlook and a higher risk tolerance, Ola could still be a promising play, especially as the company continues to expand its position in the EV market.
HSBC’s Take on Ola Electric: A Balanced View
HSBC was the first brokerage to initiate coverage of Ola Electric’s stock, setting a target price of Rs 140 using the Discounted Cash Flow (DCF) method. HSBC’s analysis focuses on four key factors:
- EV Adoption in India: Ola’s growth will depend on India’s adaptation to the electric vehicle concepts.
- Market Share and Competition: Ola’s ability to maintain and grow its market share will be critical.
- Regulatory Support: Government policies and incentives will significantly influence Ola’s success.
- Battery Manufacturing: The success of Ola’s battery manufacturing unit will be essential for its long-term profitability.
HSBC expects regulatory support for India’s EV sector to remain strong over the next 12-24 months. This could allow Ola to increase its volumes, improve its operating leverage, and better manage any future reduction in government incentives.
Ola’s Financial Performance and Expansion Plans
In the June quarter, Ola reported a 32% year-over-year revenue increase, although its losses widened to Rs 347 crore. The company is also diversifying its product lineup, entering the electric motorcycle market with new models such as the Roadster, Roadster X, and Roadster Pro. Ola plans to fully integrate these models by Q1 FY26, further strengthening its position in the EV market.
Bhavish Aggarwal’s Vision: “Tesla is for the West, Ola is for the Rest”
Ola’s CEO, Bhavish Aggarwal, has ambitious plans for the company. He recently stated, “Tesla is for the West, Ola is for the rest.” Aggarwal’s vision is to create products that serve the global south, starting with India and expanding to other regions. He also took a playful blow at Tesla’s CEO, Elon Musk, suggesting that Musk should explore new business ventures.
Aggarwal focuses on Ola’s new move, Krutrim, which aims to develop AI technology in India. He believes that building indigenous technology is crucial for India’s future and that Ola is well-positioned to lead this charge.
Conclusion
Ola Electric’s stock surge has made waves in the market, but investors should approach it cautiously. The company’s valuation is now higher than Tesla’s, but its financial performance and highly volatile stock price suggest it’s not without risks.
For those willing to take a long-term view, Ola offers the potential for significant rewards. However, staying informed and considering the risks before making investment decisions is essential.
Ola Electric is undoubtedly a key player in India’s EV revolution, and its future success will depend on its ability to surpass the challenges.
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