Ola Electric shares: Kotak sees 44% fall; auditors flag 'going concern' worries

Ola Electric Mobility Ltd is having a bumpy ride at Dalal Street as the stock slumped another 10 per cent on Friday to Rs 48.07, with its total market capitalization slipping below Rs 22,500 crore mark. The stock has plunged 70 per cent in just nine month from its 52-week high hit in August 2024, while it is down 37 per cent from its IPO price at Rs 76 apiece.

The company has been consistently reporting losses on the back of poor operational performance, leading to rise in customer dissatisfaction. Adding to the woes, auditors of the company have flagged their worries over its ‘going concern’ status and brokerage firms see another 44 per cent crash in the stock.

Starting with quarterly numbers, Ola Electric reported widening of its losses, which more than doubled in the fourth quarter to Rs 870 crore. The electric two-wheeler maker's revenue from operations declined 62 per cent year-on-year (YoY) to Rs 611 crore, while its deliveries fell to 51,375 units from 1.15 lakh units in Q4FY24.

Ola Electric Mobility's onsolidated Ebitda margin stood at -101.4 per cent, reflecting high provisioning costs and reduced operating leverage during the quarter. Ola said there have been market share pressures in recent quarters due to execution challenges and slower-than-expected industry growth. Ola's net losses widened for the fourth straight quarter.

Domestic brokerage firm Kotak Institutional Equities has downgraded the stock to 'sell' from its earlier rating of 'reduce'. The brokerage has also cut its price target on the stock to Rs 30 from Rs 50 earlier, citing a 44 per cent correction from its previous close at Rs 53.24.

Kotak said that Ola Electric's Ebitda loss for the quarter came in much above their expectations due to higher warranty provisions and weaker volumes. "Ola Electric’s future hinges on scaling up volumes and successful motorcycle foray, which faces executive and credibility challenges," the brokerage said.

Kotak has trimmed its financial year 2026-2027 volume assumptions to 34 per cent to factor in growth assumptions for the Electric Vehicle two-wheeler industry and a delay in the motorcycle launches. It does anticipate profitability to improve from the current financial year driven by the cost-cutting initiatives, shift towards the Gen-3 platform and a reversal of warranty costs.

The worst came from Ola Electric's auditors BSR & Co LLP, which issued an unqualified opinion on the FY25 financial results, where they raised concern over its ability to remain a 'going concern' which raised flags on its financially stability and, at the very least, likely survival for the next 12 months.

The caution stems from negative operating cash flows of Rs 2,391 crore during the year. "Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern," said BSR & Co LLP in its observation.

Founded in 2017, Bengaluru-based Ola Electric Mobility raised a total of Rs 6,145.56 crore through its IPO in August 2024. The company is an electric vehicle company that primarily manufactures electric vehicles and certain core components for electric vehicles such as battery packs, motors, and vehicle frames.