Ola Electric‘s shares dropped to a fresh record low on Monday as investors brushed aside the electric scooter maker’s slightly better year-on-year performance and focused on widening sequential losses. The stock sunk over 3% to hit a new all-time low of ₹70.61.

What Happened: The Bhavish Aggarwal-led company’s Q2 net losses narrowed year-on-year to ₹495 crore, compared with ₹524 crore in the same period last year. However, the losses widened sequentially from ₹347 crore reported in the June quarter, indicating ongoing operational challenges.

Meanwhile, the company's revenue from operations rose 39% year on year, reaching ₹1,214 crore. Ola Electric’s EBITDA losses for the September quarter reduced to ₹223 crore, down from ₹321 crore in the year-ago period. However, when compared sequentially, EBITDA losses expanded from ₹65 crore in Q1 FY25.

The EBITDA margin improved to -28.4%, a notable recovery from -46% a year earlier. Ola maintained its market leadership with a 33% share in the two-wheeler electric vehicle segment during Q2 despite increasing competition. The company is also scaling up its distribution network, planning to reach 2,000 stores by March 2025, up from the current 782 locations.

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Under The Hood: The auto segment's gross margins improved to 20.6% in Q2, despite reduced subsidies, driven by cost efficiencies from its gen 2 platform. Sequentially, gross margins rose by 3%, although investments in growth and partial adjustments due to the production-linked incentive (PLI) scheme had an offsetting effect. Deliveries saw strong growth, with a 74% year-on-year increase, totalling 98,619 units in Q2, compared to 56,813 units a year earlier.

The EV company has been under the pump due to mounting consumer complaints which resulted in the Central Consumer Protection Authority (CCPA) sending a show-cause notice to the company for violating consumer rights, running misleading ads and unfair trade practices. 

The company's stock had also fallen below its IPO price and fell to its all-time low on Friday.

Brokerage View: Following these results, BofA Securities retained its “buy” rating on Ola Electric but adjusted its target price from ₹145 to ₹120.

The brokerage noted consistent gross margin performance and acknowledged the company’s efforts to address distribution and service challenges. BoFA expressed optimism about Ola’s prospects, citing the accelerating shift towards electric vehicles and the anticipation of new product launches soon.

Analysts at Kotak Securities noted that Ola Electric’s EBITDA losses were higher than expected. However, the brokerage anticipates reduced EBITDA losses in the second half of FY25, supported by Ola's growth potential.

The brokerage remains optimistic about the company’s long-term prospects but believes that current valuations already account for the risks of market share loss amid intensifying competition in the electric vehicle sector. Kotak Securities maintains a “reduce” rating on Ola Electric, with a fair value of ₹70.

Price Action: Ola Electric’s share price was down 2.3% to ₹70.95 in early trade on Monday.

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