Mounting Financial Pressures, Unused IPO Capital, and a Credit Downgrade Spell Trouble Ahead for the EV Unicorn
Ola Electric Mobility, once hailed as the torchbearer of India’s electric mobility revolution, is again in the spotlight. This time, it’s not for a bold product launch or factory expansion, but for a critical financial maneuver that raises more questions than it answers.
On 22 May, the company’s board approved a proposal to raise up to INR 1,700 crore through non-convertible debentures (NCDs) and other debt instruments — a move that marks its first major capital raise since its underwhelming IPO in August 2024.
What appears on the surface as a routine corporate finance decision is, upon deeper inspection, symptomatic of a company under intense financial strain, wrestling with regulatory non-compliance, strategic missteps, and eroding investor confidence.
🔍 Fundraise Details: What We Know
Ola Electric’s board resolution clears the issuance of debt securities — including NCDs, term loans, and working capital facilities — in one or more tranches, via private placement or any other method allowed under Indian regulations. The company emphasized that the move is within its shareholder-approved borrowing limits.
“The fundraising will support growth and operational needs,” said a company spokesperson in a stock exchange filing.
However, specifics such as maturity period, interest rates, tenure, or investor identities remain undisclosed.
📉 A Telling Context: Unutilized IPO Funds and Deepening Losses
This fundraise comes less than nine months after Ola Electric’s much-publicized IPO, which raised approximately INR 2,400 crore. Industry insiders and market participants are now raising eyebrows: why does the company need to borrow INR 1,700 crore when a significant portion of IPO funds remain unspent?
This dissonance is particularly striking given that IPO funds were earmarked for:
- Retail and service network expansion
- R&D and new product development
- Capex at the Futurefactory in Tamil Nadu
According to sources close to the company, delays in expansion plans, regulatory hurdles, and poor internal execution have left a large portion of the IPO capital idle, even as operational burn continues.
Meanwhile, financial disclosures for Q3 FY25 revealed:
- A net loss of INR 564 crore, up 50% year-on-year
- Operating revenue dipped to INR 1,045 crore, a 19% decline
- Cash flow from operations remains negative
Q4 FY25 results are still pending — a delay analysts interpret as a red flag.
📉 Rating Downgrade Makes Debt Costlier
Adding to the concern is the recent credit rating downgrade of Ola Electric’s battery cell manufacturing arm, Ola Cell Technologies. On May 5, ICRA lowered the unit’s long-term rating to BBB- with a negative outlook, citing:
- A weakening parent company balance sheet
- High competitive intensity
- Execution and demand risk for cell production
- Overdependence on imported raw materials
- Delays in achieving commercial scale
This downgrade will materially increase the interest rate on the proposed NCDs, rendering the INR 1,700 crore raise more expensive and further burdening the company’s already strained P&L.
“The downgrade reflects Ola’s weakening financial flexibility and questions about the sustainability of its business model,” said an ICRA analyst.
📉 Regulatory and Operational Setbacks Compound the Risk
Ola Electric debt raise is also occurring amid heightened regulatory scrutiny and governance lapses:
- In April, the Maharashtra Transport Department ordered the closure of 107 Ola Electric showrooms due to lack of mandatory trade certificates.
- Sales-reporting discrepancies came to light when Ola reported 25,000 unit sales in February, while VAHAN data showed just 8,652 registrations.
- SEBI issued a cautionary notice in January for announcing store expansions on social media before regulatory disclosures — a violation of listing norms.
These incidents have not only attracted regulatory action but also shaken investor and consumer confidence.
📉 Market Share Erosion
Once the undisputed leader in India’s electric two-wheeler market, Ola Electric has now ceded its top position to TVS Motor. In April 2025, Ola’s vehicle registrations fell by 42% YoY, capturing just 21.46% of market share — down from a peak of over 35% in early 2023.
Aggressive pricing by incumbents like TVS and Bajaj, coupled with execution issues at Ola, have significantly eroded competitive advantage.
📉 Investor Confidence Wanes
Shares of Ola Electric have been on a rollercoaster ride:
- Current share price: INR 53.21
- IPO price: INR 76
- 52-week high: INR 157.53
- 52-week low: INR 45.35
Even after a temporary 7% pop following the fundraise announcement, the stock remains down over 30% from IPO levels. Moreover, reports indicate that SoftBank Vision Fund I, one of Ola’s largest investors, has booked a USD 46 million loss (~INR 392 crore) on its investment, marking down Ola’s fair value to USD 510 million (~INR 4,355 crore) — below its invested capital of INR 556 million (~INR 4,748 crore).
Outlook
To its credit, Ola Electric is trying to fight back. The company announced that deliveries of its long-delayed Roadster X bike will commence from 23 May, and pilot programs like “Hyper Delivery” (same-day registration and delivery) are underway in Bengaluru.
Yet, these efforts may be too little, too late if the fundamental financial and operational issues are not addressed urgently.
Final Take
The INR 1,700 crore debt raise is a pivotal moment for Ola Electric. While the official narrative frames it as capital to fund growth, the underlying signals suggest it’s more of a financial lifeline than a strategic injection.
With unused IPO funds, a downgraded credit profile, slipping market share, and rising scrutiny, this debt issuance carries significant risks — both in perception and in pricing. Unless Ola Electric can demonstrate disciplined execution, transparent governance, and tangible profitability, this latest capital raise may buy time, but not trust.
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