A decision that could have a significant effect on the Indian electric vehicle (EV) market is that prominent investors Vijay Shekhar Sharma, Zoya Akhtar, and Farhan Akhtar have decided not to sell their shares in Ola Electric during the company’s highly anticipated initial public offering (IPO). It is expected that this move will improve the market’s overall sentiment and increase confidence in the EV maker.
Credits: Money Control
Investment Background
Acquisition and Gains
In December of 2021, the founder of Paytm, Vijay Shekhar Sharma, purchased shares in Ola Electric alongside Zoya Akhtar, a film director, and her brother, actor Farhan Akhtar. Their investment began when the Nifty benchmark saw a significant increase of 48.32 percent. After taking into account a bonus issue and the conversion of preference shares, their acquisition price came to Rs 60.36 per share. They are currently riding on a 26% gain, with the top end of the offer price band set at Rs 76 per share. Sharma made an initial investment of Rs 7.5 crore through VSS Investco Private Limited, which is currently worth at up to Rs 9.46 crore. Investments made by Zoya and Farhan Akhtar have also increased in value.
Preference Shares Conversion
The preference shares held by Sharma, Zoya Akhtar, Farhan Akhtar, and Ritesh Sidhwani were converted to ordinary shares ahead of the IPO. This conversion granted Sharma 12.45 lakh shares, Zoya Akhtar 1.78 lakh shares, Farhan Akhtar 3.56 lakh shares, and Sidhwani 3.56 lakh shares. Such conversions are typical as companies prepare for public listings, aligning the interests of pre-IPO investors with future shareholders.
The Decision to Hold
Confidence in Ola Electric
By choosing not to sell their shares, Sharma and the Akhtars signal strong confidence in Ola Electric’s long-term potential. This decision can positively impact investor sentiment, suggesting that these influential figures believe in the company’s vision and future growth. Their continued stakeholding is a vote of confidence that could attract more investors to the IPO.
Market Implications
The decision comes at a time when some pre-IPO investors in Ola Electric might face potential losses due to the price band set lower than their average acquisition price. Notably, investors such as Tiger Global and Matrix Partners are expected to enjoy significant gains, while others like Alpine Opportunity Fund VI LP and Tekne Private Ventures XV Ltd might incur losses. Sharma and the Akhtars’ decision to hold could offset some negative sentiment by highlighting faith in the company’s valuation and future prospects.
Impact on Ola Electric’s IPO
IPO Details
The Ola Electric IPO, set to open on August 2 and close on August 6, is one of the largest in the country this year. It includes a fresh issue of Rs 5,500 crore and an offer for sale (OFS) of up to 84.94 million shares, totaling Rs 6145.96 crore. The upper price band places the market cap at about $4 billion, down from $5.4 billion in September, reflecting global tech market corrections and strategic adjustments by Ola to boost participation.
Boosting Investor Confidence
With the Indian market trading at record highs, Ola Electric’s IPO timing is strategic. The decision by Sharma and the Akhtars not to sell could boost confidence among potential investors. This might lead to a more favorable reception of the IPO, despite the lower valuation compared to last year. Their move reassures investors of Ola Electric’s market potential, especially given its significant 35 percent market share in the electric two-wheeler segment by the end of fiscal 2024.
Conclusion
The fact that Farhan Akhtar, Zoya Akhtar, and Vijay Shekhar Sharma have chosen to hold onto their shares of Ola Electric through the company’s impending IPO speaks volumes about their confidence in the company’s future. This calculated action should increase investor confidence and improve the IPO’s reception. The support of prominent investors underscores Ola Electric’s potential to spearhead the electric vehicle (EV) revolution in India, as the firm keeps growing its market share and product line.
