Ola Electric: Q2 FY 27 – Financial Jugglery Without Fundamental Improvements in Business

Every three months or so, I look forward to analyzing Ola Electric’s quarterly results. It’s always exciting, in a fun way, to go through the numbers, look at every figure closely, cross-reference government sales data, and then come to a conclusion. The company has a certain play on words, which is understandable, given they aren’t doing well financially. They are also not the most honest ones around; always a ‘Gulf of Hogwash’ between their claims and actuals. Reviewing the numbers, the words, the announcements, and the analyst call is critical.

I look forward to it. It’s competitive sports.

The Numbers

As always, there is a lot to talk about, so first let me get the numbers out of the way. One trait I’ve observed in Ola’s shareholder letters over the last few quarters is that they share less information with each passing quarter. This year, they decided not to mention unit sales in the shareholder letter. But they do so in another document, the KPI databook. Both documents have been released together, so it’s not that they’ve been trying to hide information. So it beats me why they would remove it from the Shareholder’s Letter. My best guess is that the SL is circulated much more. Still, even with the omissions, the shareholder’s letter remains a useful document.

In Q2 FY 27, Ola Electric reported revenue of INR 4,210 million. This was a 38.8% decline from Q2 FY 27 revenue of INR 6,880 million. Retail sales declined from 52,666 units (Scooters + Motorcycles) in Q2 FY 26 to 34,667 units in Q2 FY 27, a 34.2% decline.

Revenues have declined faster than unit retail sales, suggesting a dip in transaction prices, a poorer product mix, or both. A drop in transaction prices is in line with the usual company policy of boosting sales by burning injecting cash whenever the numbers look too weak. This is what I wrote in August when I had similar observations about last quarter’s numbers.

The velocity of the fall in registrations is less than the velocity of the fall in revenues. This indicates a substantial increase in discounting to manage sales.

Gross margin is down from INR 2,130 million to INR 1,260 million, a 40.8% dip. Gross margin percentage dipped from 30.9% to 29.9%. I can attribute it to commodity hardening, but I cannot ignore that just a few weeks earlier, Ather reported a 2% improvement in its gross margins.

However, Ola’s operating expenses declined by only 11.3% in this period, from INR 4,160 million in Q2 FY 26 to INR 3,690 million in Q2 FY 27. The operating expenses declining at a much slower pace than the revenues is worrying. Either cost savings have slipped in this quarter, or the company has hit a glass ceiling beyond which it is very difficult to find more efficiencies in the system. Given that Ola Electric already operates with very little senior management (people to fire), it is difficult to visualize how it will extract any more cost savings from here on.

Either way, Ola Electric has to focus on finding more sales than extracting more efficiencies.

Worryingly, Operating EBITDA (Gross Margins – Operating Expenses) has deteriorated this quarter, rising by 7.4% from an INR 2,030 million loss in Q2 FY 26 to an INR 2,180 million loss in Q2 FY 27.

Overall EBITDA (Gross Margins + Other Income – Operating Expenses) has deteriorated further, rising by 37.2% from an INR 1,370 million loss in Q2 FY 26 to an INR 1,880 million loss in Q2 FY 27. Here, the other income is mostly returns from fixed deposits where the company has parked its excess cash. Ola has significantly reduced the cash position in this quarter, and I will come to it later.

EBITDA margin for this quarter stood at -41.7%, declining from -18.1% in Q2 FY 26.

On a Net basis, Ola Electric reported losses of INR 3,620 million, a 13.4% improvement over Q2 FY 26 losses of INR 4,180 million.

Talking Points

Every quarter, Ola Electric finds a very plausible-sounding reason for its bad quarterly performance. Over the last two years, it has become a game of shifting goalposts. However, this quarter takes the cake, as the company started the shareholder letter with the statement (in bold) that “Demand is no longer the constraint, supply is.” Verbatim (from the Shareholder’s Newsletter):

Over the last few quarters, we reset our business and rebuilt it on a more sustainable model, which we are now growing. The main headline of Q2 FY27 is that demand is no longer our constraint; supply is. The constraint is not our manufacturing capacity but our supply chain’s ramp-up, which we are scaling rapidly.

Later in the analyst call, Bhavish Agarwal, the Founder-CEO, mentions that they have a shortage of chargers and some 5000-odd scooters could not be delivered and their revenue could not be realised.

The best-case scenario here is that they are spinning lies words, trying to hide a general lack of confidence in the brand among customers. In short, people don’t want to buy Ola. The not-so-great scenario is that the company remains mismanaged despite being the first mover and the most well-funded pure-play electric vehicle manufacturer in India. There is no reason the supply chain couldn’t supply chargers. It’s not that Ola is using any special chargers. It’s not that they started making electric scooters yesterday.

Which brings me to the outlier worst-case scenario. They have to recreate parts of their supply chain because the earlier suppliers decided not to work with Ola anymore. This is more an analysis of the situation and not privileged information. There is no public information. There never will be, until very late.

Publicly available data suggests that as of Mar 31, 2026, Ola Electric’s ​current trade payables stood at INR 6,790 million.​ This has increased to INR 7,480 million at the end of September. Also, from Ola Electric’s FY 26 annual report:

With quarterly component spend as of Q4 FY 26 at INR 1,530 million, this is nearly a year of unpaid dues. In the automotive industry, this is when suppliers stop doing business with you altogether, move to cash-advance terms, or take you to court. It is likely that all of this is happening. Ola has been taken to court by suppliers multiple times, ​here​ and ​here​.

The cash-advance and suppliers-stopping-work situation, if true, also puts in jeopardy Ola’s efforts to service its existing scooters. The company has more than a million scooters on the road, and anecdotal evidence on social networks suggests they have more problems than other brands.

Chargers are expensive. They are among the top five most expensive components in a scooter. An unpaid charger supplier would have bigger dues and would create bigger issues for Ola. The current ecosystem also offers multiple suppliers, so plausibly, one can be replaced by another. So, is the delay in the supply of chargers because Ola had to move to another supplier? I don’t know, but it is difficult to explain why a scooter business running at about 25% of its peak sales would face a shortage of chargers when the design of the charger has not changed.

Cell: Gap Between Targets and Reality

Within the Shareholder’s Newsletter, Ola Electric is talking about its Cell manufacturing business and claims:

With the Gigafactory now commissioned, our first focus is meeting our own automotive requirements, which will be roughly 30% NMC and 70% LFP. Given the growth in our Auto business, it should consume about 2–3 GWh in FY28. NMC yields are in the 70-75% today. We expect them to reach 80-85% by the end of this quarter (Q3 FY27) and around 90% next quarter (Q4 FY27). Our LFP technology is ready, and we are starting to ramp LFP production this quarter. We expect LFP yields to reach around 70% by the end of next quarter (Q4 FY27), when we will integrate our own LFP cells into our vehicles, and around 90% in Q1 FY28.

Growth in the Auto business? What did I miss? There is a strong year-on-year decline. As I write this, the first 12 days of the month have accounted for sales of only 3,277 units, a run rate of less than 275 units per day. Even with an end-of-the-month growth spurt, crossing five digits would be a challenge this month. Last month’s sales were slightly above 12,000 units.

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To use 2.5 GWh (midpoint) of batteries in the next financial year, at 5.1 kWh going into every scooter, Ola needs to sell about 500,000 scooters in the year. That’s a run rate of 40,000 units per month, about 3.5X the current run rate. There is optimism, and then there is Ola!

Then there are the claims about ramp-up. It beats me that a cell manufacturing company wants to run both NMC and LFP lines when it has very little future sales lined up. I had pointed out earlier that a GWh capacity line needs to move ahead with potential customers in parallel. Almost every major cell buyer has their supply chain for the next five years figured out.

So apart from the unverifiable claims about cell plant rampup, where the LFP ramp up looks beyond optimistic, there is the bigger question of who Ola will sell the cells to? It’s not that you can make many of them and stack them to the ceiling in warehouses.

The LFP ramp-up looks very, very optimistic. Remember, this is a technology where China has closed the doors and is not allowing technology access to any Indian company. Most under-development cell plants in India, like Tata-Agratas, Reliance, Exide, and Amara Raja, are facing challenges in ramping up due to China blocking technology access. In a climate like this, Ola claiming a 90% yield rate by Q1 FY 28 (Apr-Jun 2027) for its LFP line is debatable.

But then this is Ola. They claim a lot.

I’m not debating that they won’t be able to put LFP cells in scooters by Q1 FY 28. The cells are 46160 format and I estimate that every 5.1 kWh battery pack would use about 20-25 cells. Making this quantity for a few hundred scooters every month is manageable even with a pilot line. The problem with LFP technology is not in making the cells. It is about scaling the manufacturing. With these numbers, you don’t need to. So Ola can keep the promise of delivering LFP-energized scooters in 2027 without facing the challenge of scaling to a gigafactory level.

Ola further states in the shareholder letter:

At a yield of about 70%, using our own cells breaks even with buying cells from outside. At 85% yield, we save about 10–15% over buying from outside. This is at the cell gross margin level, before the cell business’s fixed and operating costs; those also break even versus buying from outside at about 2–3 GWh of consumption. Our raw material buying costs will fall as consumption scales from today’s low levels to 2–3 GWh over the next few quarters. Capacity beyond this 2–3 GWh will go to Shakti. Shakti Gen 2 is ready and will launch in Q4 FY27, and we expect it to grow into the remaining capacity over FY28.

I will not make a comment on the initial part of the statement. Cost claims are Ola’s internal matters and cannot be verified till the data hits the financial statements, and that happens many months later. I am worried about Ola’s confidence in cylindrical cells for energizing BESS. The Chinese world has gone towards LFP prismatic cells and current prices hover around USD 48 per kWh FOB China.

However, the company’s assertion that Shakti Gen 2 is ready made me realize that Shakti Gen 1 also exists somewhere. Except it does not show anywhere in the financial report. So, did Ola not sell any significant numbers of Shakti home UPS systems to make it a part of the reporting?

Debt and financial jugglery

One of the things that the management kept on hyping during the investor call was that the debt is reduced significantly. However, look deeper, and the numbers are different. Gross debt has fallen, but net debt has risen. Borrowings dropped from INR 24,760 million in March to INR 18,190 million in September, a reduction of INR 6,570 million. However, over the same six months, total current assets (Inventories + Cash + Trade Receievables + Cash + Bank Balance + Other Financial Assets) dropped from INR 32,510 million to INR 21,950 million, a reduction of INR 10,560 million. Net debt has increased even after a INR 7,800 million QIP.

Previous reporting on Ola