Ola Electric raised money to expand cell making capacity. But it's still sitting idle

Mint

18-05-2025

Ola Electric Mobility Ltd's plan to increase the capacity of its cell manufacturing facility has been delayed, exposing it to risks of higher costs, losing incentives and even technology going obsolete.
Ola Cell Technologies Private Ltd (OCT), a wholly owned subsidiary of Ola Electric Ltd, began constructing its gigafactory in May 2023 under a four-phase plan to produce lithium-ion cells for electric vehicle batteries.
Of the ₹5,500 crore the company raised by issuing fresh shares in August 2024, it had set aside ₹1,227 crore to expand the capacity of its cell manufacturing facility to 6.4 GWh in the second phase by April 2025.
However, it has not utilised any money from these funds, suggesting that OCT is far behind the previously disclosed timeline to investors, said Icra Ltd, the monitoring agency of its public issue, in its 15 May report shared by Ola Electric with exchanges.
Icra downgraded Ola Cell Technologies BBB- (Negative) in May.
'The battery cell manufacturing segment is highly technologically complex and has significant dependence on imports for sourcing raw materials, which exposes the project to geopolitical and region-specific risks for raw materials," the agency said in its downgrade note. 'OCT, thus, remains exposed to risks of timely execution, demand/offtake, supply chain and technology obsolescence."
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In response to Mint's emailed queries, Ola Electric said, 'We have announced the commercial production of our cells beginning Q1 FY26, and are on track to meet the set timelines. Ola Electric will be the first to commercially manufacture lithium-ion cells in India under the government's ACC (advanced chemistry cell) PLI scheme. We continue to have regular discussions with MHI (ministry of heavy industries) regarding updates on our progress and timelines for each of our set milestones."
To be sure, other than the expansion of cell factory, the company had also
Out of the ₹5500 crore the company raised through fresh issue of shares in August 2024, ₹2671 crore has been utilised while ₹2829 crore remains unutilised. The stated purpose of the fundraise, other than expansion of cell factory capacity, included investment into research and development, general corporate purposes, expenditure for inorganic growth initiatives and repayment of debt.
The unutilised funds have been parked by the company in several fixed deposit accounts, earning ₹54 crore so far in interest income.
Original road map
The company's founder Bhavish Aggarwal had on 15 August 2024 laid down the vision to achieve 20GWh capacity by 2026 as lithium-ion cells are largely imported from China currently.
A cluster of cells makes a battery. The capacity of a gigafactory is the total energy that can be produced from cells produced in a year.
In phase 1a, the company initially built 1.4 GWh capacity at ₹1,226 crore, which was completed before Ola Electric filed its red herring prospectus (RHP) before listing in August 2024. This capacity was expected to go up to 5 GWh by February 2025 under phase 1b.
In an earnings call on 7 February, Aggarwal said the capital expenditure to expand to 5 GWh will come into effect in the current financial year FY26.
According to a project cost vetting report submitted with the RHP, phase 2 was to be completed by 30 April to raise the capacity to 6.4 GWh, and targeted to increase that to 20GWh by 2026.
According to the RHP, the company was estimated to utilise ₹859 crore in the financial year 2025 and ₹368 crore in fiscal 2026 for the gigafactory expansion.
However, as of 15 May, the funds earmarked for the phase 2 remain unused, indicating that the company is way behind the timeline initially conveyed to investors.
'The testing process post completion of a phase can take time as cells are a complex and sensitive technology," said a person aware of the developments. 'A ramp-up post each phase depends on the completion of all testing and other processes of the previous phase."
Incentives at stake
While Ola Electric had acknowledged in its RHP that the timeline could change depending on the market reality, a delay will have its implications.
In 2022, Ola Electric became the first company to be selected under the ₹18,100 crore production-linked incentive plan to indigenise the cell manufacturing ecosystem in India. Under the scheme, Ola had to invest ₹225 crore per GWh of the committed 20GwH capacity, along with 25% value-addition, within two years. The disbursal of the incentives is contingent upon achieving this milestone.
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However, IFCI Ltd, the project management agency of PLI for cells, wrote a letter to the company in March stating that it had missed the deadline to complete the first milestone. While the company acknowledged the letter to the exchanges, it did not offer any clarity on the timeline.
'The Company is actively engaged with the relevant authorities in this regard and in the process of filing an appropriate response," Ola Electric said in an exchange filing on 4 March.
Under the PLI scheme, the company has to build 12GWh of capacity by 2027 to complete the second milestone and achieve 60% value-addition.
Ola Electric had previously stated that it would begin the commercial production of its cells in April-June 2025. The status of the project and the changed timeline remain unclear.
A person aware of the development said that the company has sought an extension of the deadline under the scheme from the government.
Any risk to the incentives can spell problems for the firm, according to analysts.
'One of the reasons for setting up its own Gigafactory was to take advantage of the PLI for advanced chemistry cells, which would have resulted in a 50% reduction in capital employed for setting up 20 GWhr," Rishi Vora of Kotak Institutional Equities wrote in an 18 March note.
The company may have to outsource the construction to a third party or else it would find difficult to install 20GWh capacity in the next two to three years, Vora said. The delay in timelines will also have a bearing on the financial health of the firm.
A bump on the road to profit
'The slower-than-expected ramp-up of its Gigafactory or lower-than-expected yield will result in higher cash outflow for the company in the coming quarters, which needs to be monitored," Vora wrote.
The company earlier anticipated that the integration of cell capacity will be crucial for its margins, which will aid the profitability of the company.
'At a consolidated level, when our battery cell comes in, we will actually have an expansion of margin," Aggarwal said in Q3 FY25 earnings call on 7 February.
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In October-December of FY25, the company's loss widened to ₹564 crore from ₹364 crore from a year earlier.
Ola Electric's shares have tumbled nearly 40% in 2025 against a 3.48% rise in Nifty Auto.
'Ideally, when there is a substantial delay in a project, the delay should be flagged," said Amit Tandon, founder and managing director at IiAS. 'If the project has an impact on profitability, it becomes even more important to reveal the reasons behind the delay."
Out of the ₹5500 crore the company raised through fresh issue of shares in August 2024, ₹2671 crore has been utilised while ₹2829 crore remains unutilised. The stated purpose of the fundraise, other than expansion of cell factory capacity, included investment into research and development, general corporate purposes, expenditure for inorganic growth initiatives and repayment of debt.
The unutilised funds have been parked by the company in several fixed deposit accounts, earning ₹54 crore so far in interest income.