Ola Electric’s shares plunged nearly 10 per cent intraday on Thursday, confronting shareholders with a difficult choice: invest more money to protect their ownership in an electric two-wheeler maker struggling with shrinking market share and continued cash outflows, or risk dilution, after the company announced a ₹1,000-crore rights issue at a 26 per cent discount, barely four months after raising ₹780 crore from institutional investors.
The stock touched ₹32.70 on the NSE, down 9.96 per cent from Wednesday’s ₹36.32 close, before recovering to ₹34.63, a decline of 4.65 per cent. The two fundraising exercises would together raise approximately ₹1,780 crore, assuming full subscription, highlighting the capital required to support Ola’s turnaround.
Shareholders face a choice
The rights issue offers two shares for every 25 held at ₹27 each, with October 13 as the record date. Full subscription would expand the equity base by approximately 8 per cent.
Existing investors can subscribe to maintain their proportionate ownership, sell their rights entitlements or allow them to lapse, risking dilution without compensation.
However, the 26 per cent discount does not mean an equivalent loss in shareholder value. A simplified theoretical ex-rights calculation indicates an adjusted price of ₹35.63, approximately 1.9 per cent below Wednesday’s close, assuming fully paid shares.
The sharper intraday decline, therefore, suggests investors are looking beyond the discount to Ola’s funding requirements and business performance.
Cash outflows persist
Ola Electric’s June-quarter consolidated net loss narrowed to ₹336 crore from ₹428 crore a year earlier, but revenue plunged 45 per cent to ₹455 crore. Operating cash outflow increased to ₹215 crore from ₹143 crore, while free cash outflow widened to ₹351 crore from ₹282 crore.
Of the proposed fundraising, ₹350 crore is earmarked for debt repayment and ₹400 crore for research, manufacturing and sales infrastructure. Approximately ₹600 crore would arrive initially, with the balance payable subsequently.
Promoter pledge adds scrutiny
Founder Bhavish Aggarwal has pledged 20 crore shares, representing 4.32 per cent of Ola’s equity, to finance his rights subscription. The company maintains that the arrangement involves no equity sale.
Meanwhile, September VAHAN registrations stood at 13,449 units, giving Ola approximately 6.5 per cent market share and placing it fifth behind TVS Motor, Bajaj Auto, Ather Energy and Hero MotoCorp.
June-quarter deliveries recovered to 39,192 from 20,256 in March, but remained below 68,192 a year earlier.
For shareholders, the bigger question is whether another infusion of capital can restore sales growth and reduce cash outflows, or merely postpone the need for further fundraising.