Know Your Stock| Olectra Greentech: A bet on green mobility and urban infrastructure?

(Representational image; Photo by MART PRODUCTION/Pexels)

On February 23, Olectra Greentech announced a partnership with Reliance Industries to develop a hydrogen-powered bus. Since then, the stock has climbed more than 30 percent. On March 2, Olectra-made and the country's first green tipper was cleared for roadworthiness, and the stock ended the day 5 percent higher.

Hydrogen buses and the green tipper will complement Olectra’s environment-friendly product portfolio. Investors view Olectra as a bet on green public transport and on the growth of urban infrastructure.

The public and intra-city bus market will near complete electrification by 2030, according to Koushik Bhattacharyya, managing director and head – industrials investment banking, Avendus Capital. The market is big and looks ripe for disruption.

“India is the second-largest bus market globally and 25-30 million people use it for travel every day. The 500,000+ bus parc (passenger vehicles in operation) in India today is largely diesel/CNG based and is a major source of vehicular pollution. Electric buses offer substantially lower total cost of ownership over diesel and CNG buses. The bus segment will thus see rapid electrification,” said Bhattacharyya.

Electric bus mobility will be a market opportunity of more than $4 billion in India by 2030, he added.

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What is the company?

Founded in 2000, this subsidiary of Megha Engineering and Infrastructure (MEIL) is a manufacturer of electric buses and composite insulators. Buses make up 81.54 percent of its top line, and insulators, which are largely used in power transmission and distribution, make up 18.46 percent.

When the government implemented the first phase of the Faster Adoption and Manufacturing of (Hybrid &) Electric Scheme in April 2015 to promote the production of e-vehicles, Olectra (then Goldstone Infratech) formed a partnership with BYD, the leading Chinese electric vehicle and rechargeable battery manufacturer.

Even today, its buses use the latter’s battery technology and charging solutions.

A year later, it supplied the first batch of six electric buses to the Brihanmumbai Electric Supply and Transport (BEST). Two years later, it changed its name to Olectra Greentech to reflect the focus on green transport.

Today, with a capacity to produce about 1,200 buses annually, the company’s buses are plying in more than 40 Indian cities.

The company’s standalone revenue rose 20 percent to Rs 248.6 crore in the quarter ended December from a year earlier, and standalone profit after tax climbed 4 percent to Rs 13 crore. According to company executives, these numbers were led primarily by the electric vehicle segment, where delivered volumes had grown 38 percent to hit 142 buses.

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Branching out

Over the past year, the company has diversified into other auto segments, including a leasing service. In March 2022, it acquired 34 percent stake in Evey Trans, which owns, operates and leases out electric vehicles.

In April 2022, Olectra said it plans to set up an electric vehicle plant in Telangana, the biggest for e-buses in the state. With 150 acres in Seethampur Industrial Park, this facility is expected to manufacture 10,000 e-buses, along with light and medium electric commercial vehicles and electric three-wheelers.

Bhattacharya said electrification of commercial vehicles will pick up rapidly in the near future. The immediate effect may be in the lighter end of the category.

“High and predictable daily runs make electrification extremely conducive in this segment. The 1-3.5 T product categories make sense for immediate electrification at mass scale,” he said.

He reckons electrification of light commercial vehicles may present an over $10 billion market opportunity in India by 2030.

During the December quarter earnings call, company officials discussed an off-road venture, saying it was close to getting approval for an electric tipper.

Chairman KV Pradeep explained that the government had changed regulations for battery manufacturing a few months earlier. Once Olectra gets approval with the new standards, the e-tipper will be launched.

On March 2, Olectra Greentech closed at Rs 521.9 gaining more than 5% during the day, on BSE.

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