Goldman Sachs Cuts Ola Electric Target Price to ₹23

Global investment bank Goldman Sachs has lowered its rating on Ola Electric Mobility to Sell and reduced its target price to ₹23 from ₹39.28. The brokerage cited weak cash flow, funding requirements, high interest costs, and operational challenges as major hurdles for the electric vehicle maker.

Financial Pressures

Goldman Sachs reduced its revenue estimates for future fiscal years by up to 10% due to a tougher market-share environment and expected operating losses. The company would need revenues during upcoming fiscal years to reach 3.6 times to 7.1 times earlier levels to cover its capital expenditure and interest servicing obligations. Meanwhile, Ola Electric reported a narrowed net loss of ₹336 crore in the first quarter, while revenue from operations declined 45% year-on-year to ₹455 crore.

Market Position

Vahan vehicle registration data showed that Ola Electric sold 12,894 electric two-wheelers in September, giving the company a 6.5% market share compared to 7.6% in August. The Bhavish Aggarwal-led firm recently finalised terms for a ₹1,000-crore rights issue at ₹27 per share, following a ₹780-crore fundraise through a qualified institutional placement in June. Company shares closed 6.3% lower at ₹29.93 on the BSE in the previous trading session, sitting well below their 52-week high of ₹53.47.

Context

Financial brokerages issue stock ratings like Sell to guide investors when a company faces operational or financial headwinds. Electric vehicle manufacturers often require heavy capital investments in battery cells and manufacturing plants before achieving steady profitability.