Shares of Ola Electric dropped as much as 7.6% on the Bombay Stock Exchange after Goldman Sachs downgraded the electric two-wheeler maker to a 'Sell' rating with a reduced price target of ₹23, citing challenges to achieving cash flow positivity and lowered revenue projections for FY27-29.
- Shares fell 7.6% intraday post Goldman Sachs downgrade
- Rights issue proceeds aimed at debt repayment and growth
- Company faces pressure to achieve cash-flow breakeven
What happened
Ola Electric’s shares plunged by up to 7.6% in intraday trading on October 23 following a bearish call from Goldman Sachs. The investment bank downgraded the stock to 'Sell' and cut the price target to ₹23, warning about difficulties in reaching cash flow positive status due to elevated interest expenses and heavy capital expenditure requirements in the company’s electric two-wheeler and battery cell businesses.
The downgrade coincided with the opening of Ola Electric’s ₹1,000 crore rights issue. Early subscriber interest was noted from institutional investors Motilal Oswal and Calliope Capital Advisors, who collectively applied for 2.39 crore shares. Founder Bhavish Aggarwal pledged 4.32% of his stake to participate in the rights issue, which aims to bolster the company’s financial health.
Why it matters
Ola Electric’s ability to become cash flow positive is crucial as it continues to face challenges in scaling its operations sustainably. Goldman Sachs’ lowered revenue forecasts for FY27-29 by up to 10% underscore the pressure on the company’s growth trajectory amidst a competitive and capital-intensive electric mobility market in India.
The rights issue proceeds will be primarily deployed to reduce debt by ₹350 crore and invest ₹400 crore in organic growth initiatives across electric vehicles and energy storage. Improved financial stability through debt reduction is critical for Ola Electric to maintain investor confidence and support long-term expansion.
What to watch next
The market will closely monitor Ola Electric’s Q2 earnings release for insights into recent operational performance and progress toward profitability. As of Q1 FY27, the company reported a 22% reduction in net losses but also a 45% decline in operating revenue year-on-year, signaling ongoing challenges in revenue growth.
Investor sentiment and stock performance in the near term will be influenced by the success of the rights issue subscription and management’s ability to execute on debt repayment and growth initiatives. Sustained share price weakness over six consecutive sessions suggests continued investor caution amid structural pressures in the electric two-wheeler sector.