Tax expert analyses Ola Electric's IPO filing: Potential risks and future prospects

In response to Ola Electric's recent filing for an Initial Public Offering (IPO), Ajay Rotti, founder of Tax Compaas, conveyed uncertainty about Ola's eventual valuation, stating, "Not sure what will be the exact valuation Ola will come out with."

Ola Electric, the pureplay electric scooter manufacturer, filed its Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) on Friday evening (December 22).

Speaking to CNBC-TV18, Rotti expressed a cautious stance regarding the impending valuation and highlighted various potential risks for the electric vehicle (EV) company. "Valuation will be best left to what the street decides; I can't hazard a guess," he said.

The tax expert emphasised the need to closely examine the sectoral risks outlined in the DHRP as Ola Electric ventures into the public market with its IPO filing. The potential success of Ola's battery initiative hinges on factors such as material availability and advancements in research and development.

Looking forward, Rotti shared Ola's ambitious vision, noting, "In 5 years, Ola is looking at EV penetration to go up to 55% of the replacement market." However, he emphasised Ola's significant reliance on government incentives as a crucial factor influencing consumers to make the switch to electric vehicles.

Rotti raised concerns about Ola's testing practices, he said, "Ola has not done some of the battery testing." He identified tax implications, Production-Linked Incentives (PLI), and battery safety as the main risks for Ola, underscoring the importance of comprehensive testing.

An additional risk factor highlighted by Rotti is Ola's plan to manufacture its own batteries. He pointed out that the availability of materials and the success of research and development initiatives are critical aspects to monitor in Ola's battery manufacturing venture.