Shares of electric vehicle manufacturer Ola Electric Mobility witnessed a significant rebound on Tuesday, surging by nearly 15% after hitting a new 52-week low in the previous trading session. This dramatic turnaround comes amidst concerns regarding an insolvency petition filed against the company’s subsidiary and a recent workforce reduction.
On Monday, Ola Electric’s stock price plummeted to a low of ₹46.32 on the Bombay Stock Exchange (BSE). This drop followed the news that Rosmerta Digital Services Ltd, a vehicle registration service provider, initiated insolvency proceedings against Ola Electric Technologies Pvt Ltd, a wholly-owned subsidiary, citing unpaid dues.
However, Tuesday saw a remarkable recovery. The stock opened higher and continued its upward trajectory throughout the day. By afternoon trade, shares of Ola Electric were trading at ₹53.26 on the BSE, marking an increase of over 13.5%. On the National Stock Exchange (NSE), the stock reached a high of ₹53.80, reflecting a similar percentage gain. This surge represents the biggest intraday jump for the stock in nearly four months, since late November of the previous year.
The company’s market capitalization also saw a substantial increase, rising to ₹23,492.08 crore. Despite this recent upswing, the stock has still declined by over 33% year-to-date on the BSE. The 52-week high for Ola Electric’s shares was ₹157.53, recorded on August 20, 2024, shortly after its initial public offering (IPO). Ola Electric made its market debut in August 2024, listing at ₹75.99 per share on the BSE and ₹76 on the NSE.
The insolvency petition filed by Rosmerta Digital Services under Section 9 of the Insolvency and Bankruptcy Code, 2016, alleges a default in payment for services rendered. Ola Electric, in a regulatory filing, stated that it “strongly disputes the claims made” and intends to take all necessary legal steps to protect its interests and challenge the allegations.
Adding to the recent challenges, Ola Electric has also been undertaking a restructuring exercise that includes workforce reductions across its various arms. The company announced earlier in March its plan to trim its workforce by approximately 1,000 employees in different sections to improve efficiency and reduce losses. Sources indicate that around 300-400 employees have already been made redundant as part of this move, with a stronger emphasis being placed on profitability.
Despite these headwinds, some analysts believe that the sharp recovery in the stock price suggests that investors might view the current issues as temporary setbacks. They point to Ola Electric’s continued expansion in the electric vehicle sector, its growing product lineup, and its efforts to strengthen its charging infrastructure across the country as reasons for optimism. The company has also reportedly secured fresh investments to support its expansion plans, including the establishment of new manufacturing facilities and advancements in battery technology.
Trading volume for Ola Electric shares was notably high on Tuesday, with over 64 lakh shares changing hands on the BSE by early afternoon. This figure is significantly higher than the daily average of 37.7 lakh shares recorded in the past two weeks, indicating strong investor interest in the stock’s rebound.
While the reasons for Tuesday’s sharp increase are multifaceted, several factors likely contributed to the positive market sentiment. The significant drop on Monday might have presented a buying opportunity for some investors who believe in the long-term potential of Ola Electric. The company’s swift response in disputing the insolvency claims could have also reassured some market participants. Furthermore, the high trading volume suggests that some investors might be betting on the company successfully navigating its current challenges and capitalizing on the growing electric vehicle market in India.
However, it is important to note that the situation remains fluid. Investors will be closely watching how Ola Electric addresses the insolvency proceedings and whether its restructuring efforts will yield the desired results in terms of improved profitability. The broader market sentiment towards the electric vehicle sector and any further company-specific announcements will also play a crucial role in the future performance of Ola Electric’s stock.
