On 30th September 2025, Ola Electric convened an Extraordinary General Meeting of its Board to allow Ola Electric Technologies (OET), a wholly owned subsidiary of the company, to issue non-cumulative and nonparticipating 0.001% Series A Optionally Convertible Redeemable Preference Shares (OCRPS) of face value INR 10 each, at a consideration aggregating to INR 8776.64 million (nearly USD 100 million) to Ola Cell Technologies (OCT), another subsidiary company.
From the exchange filing:
In simple terms, Ola Electric is moving funds from the IPO earmarked for the expansion of its cell manufacturing plant to its core vehicle manufacturing business. This indicates a scaling down of Ola’s cell ambitions, at least temporarily.
It also signals that the company foresees more cash burn in its core E2W manufacturing business in the near-term horizon and is beefing up its war chest.
Why does it need to do so?
Ola has been making heavy losses in its E2W manufacturing business. In the last financial year, the company operated at a -101% consolidated EBITDA margin.
InsightEV – Global Electric Mobility
This EBITDA performance was riding on a 61% fall in revenues, due to a decline in vehicle sales, compounded by a decline in revenues per unit.
The company’s first quarter of FY 2026 was not great either, with EBITDA margins declining on a year-on-year basis.
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Even worse, vehicle registration numbers declined by 48.6% from 119,466 units registered in Q1 FY 2025 to 61,514 registrations in Q1 FY 2026.
Interestingly, while reporting its financials for Q1 FY 2026, Ola decided to revise its previously reported financials. We had to capture the changes in our reporting as they were significant.
Ola Electric’s financial markers have been deteriorating rapidly since the IPO, and the company likely foresees the need for greater liquidity in the near future. The internal transfer of funds is to bolster its resources where it needs to.
IPO Funds for the Cell Gigafactory
One of the company’s most capital-intensive commitments has been its Cell Gigafactory, which Ola is setting up next to its scooter plant. The initial capacity planned is 5.0 GWh, and Ola has a declared roadmap of taking this up to 20.0 GWh over four years.
As part of the IPO, Ola had earmarked INR 12,276.41 million (approx. USD 140 million) for the expansion of its cell gigafactory from 5.0 GWh to 6.4 GWh.
As per Indian IPO ratelated regulations, these funds were locked in investment instruments and could not be utilised for anything else.
Unless the board decides to let them be used.
That’s what is happening now.
What does the unlocking and transfer of funds mean?
Ola has now decided to unlock INR 8776.64 million (USD 100 million) of the funds and use them for its regular business activities.
The unlocking of funds comes in the wake of Ola Electric seemingly giving up on its earlier plans of raising debt. In May this year, Ola took board approval to raise INR 17,000 million (approx USD 193 million) by issuing Non-Convertible Debentures (NCDs). While they received the board’s approval (that’s never challenging, is it?), we did not see any financial institutions agreeing to subscribe to the NCDs.
Impact
Ola Electric is boxed into a corner, and this unlocking of funds is a surprisingly prudent move. This does not have a short-term impact on the company’s cell plans. Ola has already set up 5.0 GWh capacity, and pilot production is on. Over the last five quarters, Ola has made significant investments in cell manufacturing, and the investments to take the plant capacity to 5.0 GWh are already in place.
Now, 5.0 GWh is more than enough for Ola’s requirements. We estimate that the entire Indian industry, at about 1.2 million units, needs only 4.2 GWh. Our estimates are based on an average battery size of 3.5 kWh per vehicle.
Ola is currently operating at a 200k units per year run-rate. Putting the average battery size of an Ola scooter at 4.0 kWh, the current energy requirements are only 0.8 GWh. There are no indicators that any of the industry participants would be buying cells from Ola.
Ola has to scale up five times from here, move all its vehicles to its own cells, and then would come close to using the 5.0 GWh cell capacity it has installed.
That looks unlikely in the short term, as the company has massive headwinds, and the Indian market is fragmenting while scaling up slowly. Meanwhile, Ola’s cell plant is running at about 65% yield and does not have the required maturity for the company to move its entire product range to the Ola 4680 Bharat cell. For the record, Ola will start putting the cells in some variants of the S1 scooter and the Roadster motorcycle soon.
In such a scenario, it makes no sense to expand the capacity to 6.4 GWh, and deploying the funds elsewhere is a better use of capital.
It’s another matter that this is a calculation that Ola would have done even before IPO, and it is questionable if the funds were ever meant for expanding the cell plant.
The other issue is that the cell factory was supposed to be the beneficiary of the government of India’s Production Linked Incentives Advanced Cell Chemistry (PLI-ACC) scheme. Under the scheme, Ola is supposed to scale the plant to 20 GWh in four years in a stepped manner. Ola explains it in detail as part of their RHP for the IPO.
With Ola moving the money intended for cell manufacturing for other purposes, it is essentially putting a pause on expanding the gigafactory beyond 5.0 GWh capacity.
In some ways, it does not even matter. If 5.0 GWh is excess for the next many years, 20.0 GWh is ridiculous. Regarding the PLI, Ola did not meet the initial terms and conditions, so as of now, the company is unlikely to get any benefits. In fact, there is a penalty levied due to a failure to meet deadlines. However, the other PLI-ACC beneficiaries are even worse off than Ola, so at some point in the near future, the government of India may want to decide if it wants to penalise Ola and risk killing cell manufacturing in India.
Or, it may find a compromise.
In any case, Ola has now liberated nearly USD 200 million to be used in its core business. Whether it gets used for engineering or to push sales through incentives is the company’s prerogative.
Why is Ola Electric bleeding?
There are multiple issues that have created the perfect storm for Ola Electric. The company has been facing falling sales due to intensifying competition, apparent quality problems with Ola products, and sales and service problems.
But beyond that, there are two major factors that especially hurt Ola in the face of falling sales. First, the company has invested significantly in vertical integration and large volumes. The high CAPEX investment has started to become an albatross around its neck, considering some of the CAPEX investments were funded through debt.
The second problem is the company’s direct-to-customer sales model. Built on the lines of Tesla’s GTM model, Ola essentially owns and operates all its customer touch points. At last count, there were 3200 of them, along with 800 more multi-brand dealer outlets that were not owned by Ola.
Effectively, the average sales per outlet last month were three units.
Even if we consider the minimum manpower requirement of each customer center at four employees, the average sales of three units per month would cause a lot of bleed.
Likely, a share of outlets did not make a single sale last month.
