Ola Electric shares hit upper circuit after tepid listing; should you buy stock or book profits?

Shares of Ola Electric Mobility made a muted debut at Dalal Street on Friday but the stock had a strong buying interest post listing during its maiden trading session, amid the rebound in the broader markets. Bucking the expectations of muted listing, the stock handsomely rewarded the investors.

Ola Electric Mobility shares had listed at par, that is at Rs 76 on NSE, which was the issue price of the IPO. The stock was listed at Rs 75.99 on BSE. However, the broad based buying sentiments pushed the stock to 20 per cent, hitting the buyer's circuit at Rs 91.20 and commanding a total market capitalization of about Rs 40,000 crore.

Ola Electric Mobility delivered decent returns to the investors on the listing day itself.  Ola Electric is the largest E2W seller in India by number of units registered in Fiscal 2024. Considering that the  company is still in its investment phase, it portrays great potential ahead, said Mahesh M Ojha, AVP – Research & Business Development at Hensex Securities.

"We believe Ola Electric is a good portfolio pick for investors  willing to invest in EV Sector. Investors can hold for 2-3 years with a long term investment perspective although investors with short term investment perspective can book 50% profits on the listing day itself," he said.

The IPO of Ola Electric Mobility was open for bidding between August 2 and August 6, where the pure-play EV player had offered its shares in the fixed price band of Rs 72-76 per share with a lot size of 195 shares. The company raised a total of Rs 6,145.56 crore from its IPO, which included a fresh share sale of Rs 5,500 crore and an offer-for-sale (OFS) up to 8,49,41,997 shares.

Despite receiving demand well below street expectation, OLA listed well above street expectations can be attributed to market mood. The short term view remains the same due to weak financials and risk of negative cash flows in future and allotted investors should understand the risk before holding, said Prashanth Tapse, Sr VP Research at Mehta Equities.

"We recommend risk taking investors to accumulate on every dip to be part of 2-3 years of journey. The long term story is intact but we may see a lot of ups and downs in the short term," he said.

The issue was overall subscribed a total of only 4.27 times. The quota for qualified institutional bidders (QIBs) was booked 5.31 times. The quota for non-institutional investors was subscribed only 2.40 times. The portions reserved for retail investors and employees saw bidding for 3.92 times and 11.99 times during the bidding process.

The flat listing highlights the need for Ola Electric to demonstrate a clear path to profitability and navigate the complexities of the EV market effectively. Investors are suggested to exit and book a minor profit, but those who want to take risks may hold their position by keeping a stop loss below 70, said Shivani Nyati, Head of Wealth at Swastika Investmart.

Bengaluru-based Ola Electric Mobility was founded in 2017. It is a pure-play electric vehicle player that primarily manufactures electric vehicles and certain core components for electric vehicles such as battery packs, motors, and vehicle frames at the Ola Futurefactory.

"On account of positive EV market outlook, favourable regulatory environment, large quantum of fresh issue in the IPO, announcement of new models along with the upcoming cell manufacturing unit (Gigafactory), we have a positive view for the company," Parth Shah, Research Analyst, StoxBox, suggesting investors to hold it from a medium to long term perspective.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.