Ola Group Faces Challenges Yet Again, Rating Downgraded For Cell Manufacturing Business

Ola Electric Mobility Ltd. shares are expected to face scrutiny today after ICRA downgraded its subsidiary Ola Cell Technologies' rating from A3 to BBB- with a negative outlook. According to ICRA, the downgrade reflects "weakening of the credit profile of the parent entity, due to weakening in the performance of Ola Electric Mobility's automotive unit, led by increased competitive intensity and a longer-than-expected road to profitability."

Ola Cell Technologies, which began battery production with a 1.4 GWh capacity in March 2024, faces challenges including timely execution risks and technological complexity. The battery cell manufacturing segment heavily depends on imported raw materials, exposing it to geopolitical and region-specific risks.

Despite these challenges, ICRA noted several strengths for Ola Cell Technologies, including strong support from its parent company, early-mover advantage in lithium-ion cell manufacturing, favorable EV demand outlook, and eligibility under the ACC-PLI scheme.

Meanwhile, founder Bhavish Aggarwal is restructuring the group's companies, with plans to move the intellectual property rights for the Ola brand to a new holding entity controlled by his family office. Currently, these rights are housed under ANI Technologies, which operates the ride-hailing business and licenses the brand to Ola Electric for a fee.

(Also Read: “New Electric Vehicles In The Coming Quarter,” Says CEO Of TVS Motor Company)

The restructuring has reportedly caused concern among some ANI shareholders who fear losing royalty income from the brand license. This comes as Aggarwal pushes his companies into new, capital-intensive businesses across mobility, electric vehicles, and artificial intelligence.

The Ola Group comprises multiple businesses with distinct shareholder structures. While investors like Warburg Pincus, Vanguard, Steadview Capital, and DST Global have stakes in ANI Technologies, they do not hold shares in Ola Electric or Krutrim AI. Other investors like SoftBank, Hyundai Motor, and Temasek have backed both ANI and Ola Electric.

Aggarwal currently holds 8-9 per cent of ANI Technologies, over 30 per cent of Ola Electric, and nearly 90 per cent of Krutrim AI. The realignment coincides with Ola Electric's declining market position. In April, the company reported a 42 per cent year-on-year drop in sales, losing its leadership position to TVS Motor as competition intensifies from both electric-only players like Ather Energy and legacy manufacturers including Bajaj Auto.

ANI Technologies' planned initial public offering (IPO), in progress since 2020, appears to be delayed. The company has rebranded from Ola Cabs to Ola Consumer, indicating a strategic shift beyond ride-hailing to include food delivery through ONDC, cloud kitchens, and quick commerce services.

For the fiscal year 2024, ANI Technologies reported consolidated revenue of ₹2,203 crore, down 3 per cent from the previous year, while its losses narrowed to ₹216 crore from ₹388 crore. The company's valuation has been reduced by investors, with Vanguard valuing it at $2 billion as of August 2024—significantly below its peak valuation of $7.3 billion in 2021.