Ola Electric shares nosedive 10% after Q4 net loss. Should you buy, hold or sell?

India Today

4 days ago

Shares of Ola Electric Mobility nosedived as much as 10% in early trade on Friday, hitting a low of Rs 48.07 on the Bombay Stock Exchange (BSE), as the company's March quarter earnings triggered a wave of selling.The stock was trading around Rs 50.35, down 5.4% around 10:25 am, after the electric two-wheeler maker reported that its Q4 net loss more than doubled year-on-year to Rs 870 crore, from Rs 416 crore in the same period last year.advertisementThe market's reaction was in line with expectations, with investors spooked by a 62% drop in revenue, which fell to Rs 611 crore for Q4 FY25. Deliveries during the quarter also slumped to 51,375 units, compared to 1.15 lakh units a year earlier, highlighting weakening demand and execution issues flagged by the company itself.
Operational metrics painted a grim picture. The company's auto EBITDA margin plunged to -78.6%, from -9.3% in Q4 FY24. On a consolidated basis, the EBITDA margin was -101.4%, impacted by high provisioning costs and low operating leverage. EBITDA losses widened to Rs 695 crore, more than double the Rs 312 crore loss in the same quarter last year.Still, Ola Electric pointed to green shoots, including a slight uptick in gross margins to 19.2%, driven by better monetisation and the growing share of its newer Gen-3 platform vehicles. These scooters offer 20% more power and range while reducing costs by 11% compared to the older Gen-2 versions.advertisementThe company also continues to place big bets on rural demand and product diversification. Ola recently launched the Roadster X, its first electric motorcycle — a category that is nearly double the size of the scooter market in India. With a range of 501 km and top speed of 125 km/h, the Roadster X is key to Ola's strategy of expanding its reach beyond urban centres. The company now boasts over 4,000 direct-to-customer (D2C) touchpoints, half of which are located in Tier-3 and rural India.Despite the weak quarter, Ola is optimistic about Q1 FY26, projecting adjusted revenue of Rs 800–850 crore and a sharply reduced auto EBITDA margin of -10%. Management said it expects to break even at under 25,000 monthly unit sales, helped by better cost controls and rising scale.As of March-end, the company had a gross cash balance of around Rs 4,000 crore and is exploring non-dilutive debt of Rs 1,700 crore to support its operations.Brokerages on Ola's outlookThe dismal quarterly performance has triggered a mixed response from brokerages.Kotak Institutional Equities has downgraded the stock to "sell" from "reduce" and slashed its target price to Rs 30, marking a steep 60% cut from the IPO issue price of Rs 76 and 80% below its post-listing high of Rs 157. Kotak cited execution concerns, weakening brand equity, and delayed motorcycle launches as key risks. It also lowered FY26–27 volume estimates by 32% to 34%, reflecting a slower ramp-up in both the broader EV two-wheeler industry and Ola's own product lineup.advertisementStill, the brokerage did note that cost-cutting, the Gen-3 platform, and a likely reversal in warranty provisions could improve profitability from FY26 onwards.On the other hand, Goldman Sachs remains bullish with a "buy" rating and a price target of Rs 70, though that too is below the IPO price. The firm is watching closely for progress on battery cell manufacturing, where current yield is at 63%. Ola plans to start using its own cells in its vehicles once the yield surpasses 80%.Meanwhile, market consensus remains cautious. According to Trendlyne, the average target price is Rs 67, indicating an upside of roughly 25% from current levels. Among the eight analysts tracking the stock, four have a 'buy' rating, two say 'hold,' and two recommend 'sell.'Buy, hold, or sell?Ola Electric's Q4 numbers have laid bare the challenges facing India's EV poster child, from falling volumes and margin pressures to delays in execution. While the company's aggressive bets on electric motorcycles and rural expansion could pay off, the near-term outlook is murky.advertisementFor long-term investors willing to stomach the volatility, Ola's deep cash reserves, Gen-3 upgrades, and focus on cost efficiencies offer some hope. But for now, the Street remains divided, and the stock may continue to be a bumpy ride.(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)