“The Dark Reality of Ola’s Come Back!!”, this blog post details the surprising market reaction to Ola Electric Mobility’s recent financial results.
Key Findings from the Analysis
Despite a poor quarterly performance, Ola’s share price saw a single-day increase of 17%. We have analyzed the company’s June quarter results to understand this unexpected market behavior.
- Revenue vs. Sales Units: While year-on-year revenue was down by 50%, quarter-on-quarter revenue increased by 36%. This revenue growth was not due to an increase in scooter sales, which were actually 20% lower than in the previous quarter. The increase was attributed to the sale of their more expensive Gen 3 models, which accounted for 80% of the scooters sold.
- Market Share: Ola’s market share in the electric scooter segment has dropped significantly, from around 40% to 19-20%, placing the company third in the market behind TVS and Bajaj.
- Cost Cutting and Expenses: The company’s expenses decreased by 25% quarter-on-quarter. A major reason for this reduction was a 47% drop in “other expenses,” largely due to the “Project Lakshya” cost-cutting initiative and a significant decrease in warranty claims. The warranty period for a large portion of the older Gen 1 and Gen 2 models has expired, shifting future repair costs to the owners.
- Financial Status and Future Plans:
- The company’s cash flow from operations remains negative at ₹143 crore.
- Ola has received approval to raise ₹1,700 crore, but the purpose of these funds is not specified.
- Significant funds from its IPO, including ₹1200 crore for a cell manufacturing facility and ₹2500 crore in unutilized fixed deposits, remain untouched.
- CEO Bhavish Aggarwal is also launching a new AI company, Krutrim AI Labs, with a planned investment of ₹100 crore.
Conclusion
The he 17% share price increase was not a result of fundamental improvements but rather a reaction to the company performing “less badly” than expected. We remain unconvinced about a full turnaround for the company but hopes for the best for its investors.