Ola’s Bhavish Aggarwal hopes for turnaround with new home battery storage

The pivot comes after the loss-making firm saw a 43% drop in revenue and 47% plunge in sales in the latest quarterly results this month, underlining the scale of Ola’s troubles. It also pared its second-half sales expectations, shaving the full-year estimate to about 40% below earlier guidance.

The negative cash flow from operations in the half year ended Sept. 30 was primarily due to “continued operating losses and lower-than-expected growth in sales volume,” Ola said in the Nov. 6 filing. The company has to consider “mitigating circumstances, in order to support its operations and meet its continuing obligations,” it added.

Ola’s market share in the e-scooter segment was 11.5% in October, down from a market-leading 30% last year.

‘Visible Strain’

“The company’s situation is already showing visible strain,” Rishi Vora and Apurva Desai, analysts at Kotak Securities Ltd., wrote in a Nov. 6 report. “Without acknowledging and addressing core issues (volumes), the fragility will rapidly escalate into a full-blown crisis.”

An Ola electric scooter showroom pictured at a newly launched Ola electric store in New Delhi on 25 December 2024. Photographer - Anindito Mukherjee/Bloomberg

Kotak, with a sell rating on the stock, estimates debt obligations for Ola of 5.5 billion rupees for the year ending March 2026 and 6.2 billion rupees for the next 12 months. While the firm has trimmed quarterly losses, the brokerage said the net cash has slipped to 1.6 billion rupees by end-September from 4.8 billion rupees at the end of March.

The company has “taken separate enabling provisions from the board to raise either debt, equity, or a combination of both at an appropriate time,” an Ola spokesperson said in an email.

The spokesperson added that the company had no immediate need for fresh debt or equity after reclassifying the use of IPO proceeds and deploying some of that for debt repayment.

Aggarwal told analysts in a Nov. 6 call that the strategy in recent quarters has been to focus on cost efficiencies, improve the gross margins and roll out new products. The plan is to “launch the motorcycles in a credible way and also fix some of the front-end operational challenges,” he said.

A spokesperson for SoftBank Investment Advisers said the firm doesn’t “comment on the affairs of specific portfolio investments” in an email. SoftBank Vision Fund holds a 14.7% stake in Ola.

Firefighting Mode

Ola has been in firefighting mode much of this year — facing regulatory raids and even allegations of cross-border technology theft — while rivals Bajaj Auto Ltd., TVS Motor Co. and Hero MotoCorp Ltd., as well as startup rival Ather Energy Ltd., have been gaining ground.

Ola’s “early lead came when rivals were slow and selective. But now, customers have reliable, proven brands to choose from,” said Jay Kale, analyst at Elara Securities India Pvt. “As incumbents and Ather Energy expand their distribution and capacity, Ola will find it harder to grow its share.”

While the stock recovered in August and September with some investment managers such as Mirae Asset Financial Group and Helios Capital Asset Management increasing their stakes, most of those gains have now been erased.

Also, about 8.3% of the stake controlled by Aggarwal is encumbered, stock exchange filings show, creating a margin call risk whenever the shares fall. Aggarwal has already topped up his collateral at least once this year.

The Bengaluru-based EV firm is seeking to reinvigorate its business model with a foray into battery-energy storage systems. It’s a move typical of Aggarwal’s playbook. A serial entrepreneur, he has spun off several ventures with varying success in the past.

Aggarwal launched the Ola Shakti product line last month, aimed at homes and small businesses and priced between 120,000 rupees and 125,000 rupees each.

Battery Bet

The fledgling business, which is based on its proprietary 4680 Bharat battery cells, should bring in 1 billion rupees in revenue in the March quarter when the sales begin, Aggarwal said in the earnings call. He added that for the year ending March 2027 the “median guidance” was for 10 billion rupees in revenue from this venture. That’s nearly one-third of Ola’s projected revenue this fiscal year.

“The cell business is extremely capital-intensive, with a long path to profitability,” Kale said, adding that pricing pressure on cells was expected to continue. “Achieving profitability is difficult without reaching a 10 GWh scale.”

While the move resembles similar efforts by Elon Musk’s Tesla Inc. to diversify and expand into backup power systems, the India EV maker will need a strong sales network to push its new product.

Unlike some large Indian businesses keen on grid-scale storage, Ola is looking to tap the home inverter market. This segment is almost entirely comprised of lead-acid based back-up systems from well-established players whose products sell at a fraction of Ola’s lithium-ion cell packs.

The overall India inverter-battery market is worth as much as 160 billion rupees and a 7% to 8% first-year share for Ola will be “challenging given limited brand presence and distribution moat,” Kotak analysts wrote.

Ola Shakti battery back-up packs will be sold at its Ola stores and online. While the home battery storage market per se is attractive, a model focused on pure retail distribution will likely face challenges, according to Anand Ramanathan, partner and consumer industry leader at Deloitte India.

“Partnerships with real estate players and influencers like architects, interior designers etc. are essential for new entrants because home inverters require technical education and aren’t impulse purchases,” Ramanathan said.

This is why Ola’s core automotive segment must perform strongly, according to Elara’s Kale. But that “seems challenging given the current trajectory of market share and volumes,” he said.