Ola Electric Stock Faces Potential 43% Decline; Kotak Gives 'SELL' Rating. Increased competition and declining brand equity could lead to EBITDA-level losses for the company.
Share Price: Ola Electric's shares have been experiencing a continuous decline. On May 30th, the company's stock plunged by up to 10% at the market opening. This is attributed to the company's weak financial results and a report from brokerage house Kotak, which projects a potential 43% drop in the share price. Kotak maintained a 'Sell' rating on Ola Electric's stock, setting a target price of ₹30, down from a previous target of ₹50. This report has increased investor concerns, and the share price continues to fall.
Why did Kotak give Ola Electric a 'Sell' rating?
Kotak Institutional Equities issued a 'Sell' rating on Ola Electric due to several perceived weaknesses in the company's current position. The brokerage believes Ola Electric will face numerous challenges in the coming period, including:
- Increasing competition
- Declining brand credibility
- Rising company costs
- Failure to achieve expected volume growth
Kotak suggests that Ola Electric's future depends on its ability to rapidly increase volume and successfully enter the motorcycle segment. However, concerns regarding management and reliability remain.
Continued EBITDA-Level Losses
Kotak believes Ola Electric's operational performance is weak. The company is expected to continue incurring EBITDA-level losses due to consistently rising costs and lower-than-expected sales. The brokerage stated that Ola Electric needs significant volume growth to overcome its cash flow problems; otherwise, future losses are likely.
Ola Electric's Quarterly and Annual Financial Performance
The March quarter (Q4FY25) results were unfavorable for Ola Electric. The company's losses doubled to ₹870 crore, compared to ₹416 crore in the same period last year. For the entire fiscal year 2024-25, the company reported a loss of ₹2,276 crore, compared to ₹1,584 crore in FY24. Operational income decreased to ₹611 crore, down from ₹1,598 crore the previous year. Full-year operational revenue stood at ₹4,514 crore, lower than the ₹5,010 crore achieved in the previous fiscal year.
Share Price and Decline Trend
Ola Electric's stock was listed on the BSE at ₹76 in August 2024. After listing, the share reached an all-time high of ₹157, but it has now fallen by approximately 80% from that high.
- The share price has fallen by 11.61% in the last three months.
- The decline over six months stands at 42.52%.
- The company's current market cap is ₹22,195.30 crore.
Will Ola Electric's strategy succeed?
Ola Electric aims to achieve profitability in the current fiscal year (FY26). The company's strategy focuses on cost reduction, a shift to the Gen-3 platform (lower-cost parts), and reducing upfront costs like warranties. However, the company faces significant challenges, including the need for volume growth and competitive pressure.
