From Rs 146 peak to Rs 48 trough: Inside Ola Electric's stock plunge

Indian Express

16-06-2025

What if a company sold 30% of all electric scooters in India, yet saw its revenue plunge and losses mount? Ola Electric Mobility finds itself in that paradox. It's a leading player in the Indian e-scooter market, holding a 30% market share in terms of volume, but in the latest quarter, its sales fell below a rival's for the first time. Investors who cheered its rapid growth are now asking a tough question: Can Ola Electric turn today's hefty losses into tomorrow's profits?
Its stock, which hit a peak of Rs 146 per share, is currently trading at Rs 48 per share.
The question now is: Can Ola Electric pull off a comeback?
Ola Electric's financial journey has been volatile. The company recorded operating income of Rs 2,651 crore in FY23, which doubled to about Rs 5,103 crore in FY24. But FY2025 told a different tale: revenue slipped ~9% to Rs 4,645 crore. This dip came even as Ola Electric delivered more scooters than ever – 3.59 lakh units in FY25, up from 3.29 lakh the previous year.
How do sales grow while revenue falls?
The answer lies in product mix and pricing. Ola Electric introduced lower-priced models like the S1 X, which drove mass adoption (196,000 S1 X scooters sold in FY25, a 3.5x jump YoY), but at the cost of a lower average selling price. Essentially, Ola sold more scooters for less money each, a trade-off between volume and value.
Profitability has been elusive throughout this growth spurt. Ola Electric remains deep in the red, with net losses widening to Rs 2,276 crore in FY25 from Rs 1,584 crore in FY24. In Q4 FY25, revenue plunged ~60% year-on-year to Rs 649 crore, and the net loss widened to Rs 870 crore.
Ola Electric's EBITDA dropped to -101% in Q4 FY25. The loss was further accentuated because of a one-time warranty provision (Rs 250 crore) on its Gen 1 and 2 scooters that faced customers' ire for poor performance. For the full year, EBITDA margin was -34.6% (vs -22.5% in FY24).
Simply put, Ola spent far more per scooter than it earned.
Why the wild swings in sales and EBITDA margins?
Industry cycles and policy changes played a role. When the FAME-2 EV subsidies ended in April 2024, it was like removing a turbocharger from the market. Industry-wide sales took a hit as electric two-wheelers became more expensive overnight. Ola Electric felt this as quarterly deliveries (units) dropped from 1,25,198 in Q1FY25 to 51,375 in Q4FY25.
Competition also revved up: traditional motorcycle giants Bajaj Auto and TVS Motocorp jumped into the electric race, grabbing a combined 40% high-speed e-scooter market in FY2025 (up from just 7% in FY2022).
As these well-funded incumbents ate into the pie, Ola Electric's growth moderated. Sales volumes in FY25 grew only 9% (3.59 lakh units vs 3.29 lakh units) after doubling in earlier years, showing how a more crowded market and Ola's operating issues, such as VAHAN registration (February 2025) and service-related challenges, slowed its momentum.
Even Ather Energy overtook Ola Electric in revenue during Q4 FY25 (Rs 676 crore vs Rs 611 crore – Ola).
So, what's Ola Electric's response?
It recognised that profitability would require relentless cost-cutting and scale. It embarked on Project Lakshya, a cost reduction drive, and Project Vistaar, a network expansion and efficiency programme.
Project Lakshay's target by June 2025 was to bring fixed burn rate to 110 crore per month (vs 121 crore in April 2025. It also says that the EBITDA breakeven in the auto segment is now down to 25,000 units.
Ola currently sells about 360,000 scooters a year. They have a fixed bill — rent, salaries, electricity — that they're aspiring to bring down to Rs 110 crore every month.
Their expectation is: 'If we sell 25,000 scooters a month, that should pay all those fixed bills.'
To do that, each scooter needs to earn Rs 44,000 before fixed costs (because Rs 110 crore ÷ 25,000 scooters = Rs 44,000).
Last year, Ola Electric sold a scooter for about Rs 1.3-1.56 lakh (reported revenue/units sold). So earning Rs 44,000 profit from Rs 1.3-1.56 lakh price is like keeping 28-34% as margin before fixed costs.
In super simple terms:
If they can make that much on each scooter and keep selling as many as last year, they will start breaking even on an operating profit level.
However, hitting Rs 44,000 per unit or 28-33% of sales can be challenging.
Does this 28-33% constitute gross margin? Does this constitute gross margin minus variable costs? In its Q4FY25 shareholder letter, Ola Electric has mentioned that it expects gross margin to go up to 36.5%, including PLI in Q2FY26.
Comparison with peers
A comparison with Bajaj Auto, TVS Auto, and Hero MotoCorp reveals that Ola's expectation of gross margin/margin before fixed costs of 28-33% may be optimistic.
For compariosn, Bajaj Auto earns a gross margin of 30-32% and an EBITDA margin of around 20%.
Though it must be pointed out that Ola Electric is a pure EV scooter company, while the competition still makes a large chunk of its revenues from internal combustion engine (ICE) scooters and other two-wheelers.
Ola Electric is also vertically integrated, something that ICE players are not. Perhaps it is counting on this vertical integration to eke out higher gross margins in its auto segment.
Management is optimistic
Ola Electric's founder, Bhavish Aggarwal, called Q4 FY25 'a quarter of a major transformation.'
He pointed out that Ola Electric only counts a sale upon delivery, not booking, so a backlog in registrations meant revenue got pushed out of Q4 into Q1. By the end of Q1 FY26, that issue will be resolved. Ola Electric pre-announced a revenue guidance of Rs 800-850 crore, along with a gross margin improvement to 28-30% for Q1 FY26 (and 36.5% in Q2FY26), a notable jump from Q4's 19% margin.
In short, management is signalling that the worst may be behind them.
They emphasise that cost cuts (Lakshya) and network fixes (Vistaar) are largely done, and the foundation is set for a rebound.
Poor cash flow position
While an 'EBITDA breakeven goal' is great if a startup is headed towards an IPO listing, for a listed company, it's cash flows that matter.
Something Ola Electric does not have yet.
The company is burning cash. In FY25, Ola Electric's operating cash flow was a negative Rs 2,391 crore, exceeding its accounting loss for the same period.
Inventories piled up when sales sputtered, tying up cash in unsold scooters and parts. The company's interest coverage ratio is negative, too, reflecting that operating earnings can't cover even the modest interest on its debt. Notably, Ola Electric's finance costs increased to Rs 366 crore in FY25 from Rs 186 crore in the previous year, partly because it raised debt for its projects.
In the absence of any cash flow from operations, on May 22, 2025, the company's board approved a fund raising of Rs 1,700 crore of '(i) term loans, working capital facilities; or (ii) issuance of Non-Convertible Debentures (NCDs) or any other eligible debt securities'
Valuation and investor perspective
Given Ola Electric Mobility's potential liquidity issues, operating losses, inadequate cash flows, and increasing competition from incumbents and newer entrants, it's challenging to peg a valuation to the company.
However, on a price-to-book basis, a 4.2x book value may seem low.
Ola Electric Mobility's lower valuation versus peers may be justified, given where the numbers stand currently. For the stock to re-rate materially, it must demonstrate the ability to scale up in volume terms and at least hit EBITDA breakeven.
Note: We have relied on data from http://www.Screener.in and http://www.tijorifinance.com throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
Rahul Rao has helped conduct financial literacy programmes for over 1,50,000 investors. He also worked at an AIF, focusing on small and mid-cap opportunities.
Disclosure: The writer or his dependents do not hold shares in the securities/stocks/bonds discussed in the article.
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