Ola Electric plunges nearly 10% as ₹1,000-cr rights issue puts shareholders in a bind

Ola Electric, the electric two-wheeler maker, experienced a sharp 10% plunge in its shares on Thursday, leaving investors facing a crucial decision. The company announced a ₹1,000-crore rights issue at a 26% discount, just four months after raising ₹780 crore from institutional investors. This move aims to raise approximately ₹1,780 crore in total, highlighting the scale of capital required to support Ola's turnaround.

The rights issue offers investors two shares for every 25 held at ₹27 each, expanding the equity base by around 8% if fully subscribed. However, existing investors can choose to maintain their proportionate ownership, sell their rights entitlements, or allow them to lapse, risking dilution without compensation. Despite the 26% discount, the adjusted price of ₹35.63 implies only a 1.9% drop from Wednesday's close, suggesting that investors are more concerned about Ola's funding needs and business performance rather than the discount itself.

Although Ola's June-quarter net loss narrowed to ₹336 crore from ₹428 crore a year earlier, revenue fell 45% to ₹455 crore. Cash outflows, both operating and free, increased significantly, with the company earmarking ₹350 crore for debt repayment and ₹400 crore for infrastructure. Founder Bhavish Aggarwal pledged 20 crore shares to finance his rights subscription.

With September VAHAN registrations at 13,449 units, Ola holds a 6.5% market share, ranking fifth behind competitors like TVS Motor, Bajaj Auto, Ather Energy, and Hero MotoCorp. While the company claims the rights issue involves no equity sale, shareholders are left wondering whether further capital infusion can revive sales growth and reduce cash outflows, or simply postpone the need for additional fundraising.