Ola Electric Mobility Limited (OLAELEC) Q1 2027 Earnings Call Transcript

Good day and welcome to Ola Lekrit's Q1 FY27 online conference call. As a reminder, all the participants will be on the listening board and there will be an opportunity to ask questions after the opening remarks conclude. Please note that this conference is being recorded. Before we begin, two quick announcements for the attendees. Anything said on this call which reflects our outlook for the future or which could be construed as a forward-looking statement may involve risks and uncertainty. Such statements or comments are not guarantees of future performance and actual results may differ from those statements. Now, I would like to request Shri Bhavish Agarwal, Chairman and Managing Director and Shri Bhavish Astoghi, CFO Ola Electric, to begin the conference. To begin. First I would request Deepa to start with the opening remarks.

Thank you so much. Good afternoon, everyone, and thank you for joining for Ola Electric Q1 27 earnings call. As you are aware that Q1 marks an important point in the evolution of our business. You know, last year, which is financial year 26, was a year which actually took some difficult decisions and necessary actions. We reset the operating model, streamlined the organization, tightened execution, and materially optimized our cost structure. Q1-27 was the first full quarter operating on that reset pace, and the results give us confidence that these changes are beginning to translate into business performance. For the quarter, we returned to growth, gained market share, maintained strong gross margins, and did so on a significantly lower, leaner operating pace. Deliveries increased to approximately 39,200 units, nearly doubling quarter-on-quarter, while orders increased to approximately 44,000. Automotive revenue grew 72%, sequentially to 455 crores, with gross profit of 139 crores. Our growth materially outpaced the industry with the broader electric two-wheeler market grew approximately 17% quarter-on-quarter. All our registrations grew 97%, taking our market share from 5.1% to 8.4%. This growth was broad-based with sequential improvement across every region of the country, giving us a diversified base from which... The second important point is the quality of the growth. Despite a challenging commodity environment, we sustained automotive gross margins at 30.5%, reflecting the underlying strength of our product economies. At the same time, we continue to optimize costs of our business, right? Consolidated operating expenses declined 22%. Quarter-on-quarter to 333 crores, and we remain focused on moving towards a steady-state operating cost base. As a result, consolidated adjusted operating EBITDA improved from negative 326 crores in Q4 of last year to negative 195 crores, you know, of this quarter of 27. Our objective is to grow on this leaner operating base and progressively translate incremental revenues and gross profit into operating leverage, taking us to your message.

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Taking us towards break-even and sustainable profitability. The balance sheet has strengthened during the quarter through the successful completion of 780 quotes, QIP, giving us greater financial flexibility as we constitute the next phase of our growth. Beyond the immediate financial performance, there are few structural drivers that are increasingly important to our medium-term economics. Our 4680NMC branch cell is already commercially deployed, while 46100LFP cell is now BIS certified. And vehicle ready. As LFP is progressively integrated into our portfolio, we expect battery cost optimization to become an additional lever for product economics. More broadly, owning the self-roadmap gives us greater control over cost, supply, and product development. The second is monetization beyond the initial vehicle sale. We now have an installed base of more than a million customers. As this base matures, service can increasingly develop into a recurring high-margin revenue stream with our roadmap targeting service revenues of approximately 400 to 500 crores by 2027-28. We are increasingly using AI as an operating of productivity layer across sales, registration, fulfillment, service, and R&D. The objective is simple, improve customer experience and execution while allowing the organization to scale without proportionately scaling cost. Finally, on the cell business, we are moving from capability creation towards commercial deployment. The Giga factory is expected to be operational at 6 GWh by September, supporting greater own cell integration in our vehicles, as well as opportunities across energy storage and other applications. As we look ahead, our priorities are clear scale volumes with leaner cost base, drive operating leverage, deep and vertical integration, broader distribution and lifecycle monetization and remain disciplined on capital and cash. The external environment remains supportive with electric two-wheeler penetration in India crossing 10% for the first time in June of this year. For us, however, the focus remains firmly on execution. Q1 is the encouraging first proof point after the reset. We have demonstrated that OLA can grow significantly faster than the market while operating with a materially lower cost structure. The task is to compound that progress and translate higher scale, stronger product economics, and deeper technology ownership into improved margins, lower cash burn, and ultimately Sustainable profitability. With that, I would actually stop here and I will seek comments and questions from the group. Thank you so much.

Thank you, Deepak. Now we begin the question and answer session. Anyone who wishes to ask a question may use the raised hand option. If you wish to remove yourself from the question queue, you will get the raised hand option once again. Participants are requested to unmute themselves before asking the question. Before asking the question, we request you to introduce yourself with your full name and your organization. Now we wait for a moment while the question queue assembles and then we begin with the question and answer.

So, while we wait, I just want to underline some of the comments Deepak said. It's been an important quarter, Q1. Margins were steady, still industry leading above 30%, despite the commodities upset. And we do forecast margins to be in this range as over the next quarter or two, commodities come down and margins will further improve again. I think the highlight of this quarter was obviously the top-line recovery, strong top-line recovery. As well as operating cost reduction. And I think Deepak highlighted it in his comments, but almost on 2x volumes, Q4 versus Q1 sequentially, our OPEX has actually come down meaningfully. OPEX in Q4 was, I think, 428 crores. This is total OPEX, including leases. And in Q1 was 333 crores. In this, there was a one-time reversal of the ACC-PLI penalties that we were taking every quarter. About 55 crores or so, there was a reversal. So even if you remove that, the OPEX was about 380-odd crores, which is meaningfully lower than the OPEX of Q4, on almost a doubling of volume. On OPEX, we continue to structurally improve our cost structure. I think over the next couple of quarters, this OPEX will come down into the 300 to 325 crore range, which is where our target is. And while we are doing this, we are going to keep gross margins steady to slightly growing, and volumes also steady to slightly growing. So, I feel from some of the challenging quarters in the past, we've now gotten a good balance in the business between growth, as well as cross-margin steadiness, as well as operating cost improvements. So, overall, management feels very, very confident of the path ahead. We have some very exciting stuff coming up on 15th August. I hope you all will be tuned to that just in about a week from now. A couple of other things that happened in the last few days also I want to highlight and I'm sure to come into your questions also. Firstly, we signed our first MOU for the Mahashakti product, which is the utility scale energy storage. That will be a very meaningful growth driver for the company in the coming years. And you can see from that MOU that it's high quality, renewable platforms, utilities. Everybody is now engaging with us to get access to our Mahashakti product as it comes online. You know, we will keep announcing more demand pipeline of Mahashekti as it comes online. This one was 20 gigawatt hour through the next five, six years. And I feel very confident that more and more demand pipeline will get announced. Actually, like I said, speaking to everybody. So demand pipeline is building soon.

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Sorry about that. That's not us. So, continuing with the cell business, like Deepak also mentioned, 6 gigawatt hour will get fully commissioned in this quarter. So, that's, again, a good, exciting thing to look forward to. Thank you. We've also been talking to companies across the spectrum to use our cell in their products, and I can say that we've had very encouraging responses from global OEMs also, as well as Indian companies, especially in sectors like drones, etc. We will be announcing more in the coming few days, but very strong. Many, many companies are testing our cell. Finally, just yesterday, we also announced that we have evolved our auto-distribution strategy to a multi-channel strategy from a single-channel company-owned approach, and I think this is also going to be meaningfully enhancing the company's growth going forward in the near term, actually. I want to share a little bit of anecdote there before we open up. From almost the time we started this company, five years ago, we've had a lot of people call in and ask for being our dealers. Now, in the early days, just going via dealership would have been a slower rate of growth, and, you know, a company-owned strategy allowed the brand to interact directly with the customers, whereas back in the day, four or five years ago, the whole dealer ecosystem was still a little early on automotive, on EVs. Confidence on EVs was low, but that has materially changed to a large extent. Our scale has evolved that, as well as the whole industry has grown. So now, as soon as last month or so, we've been engaging, I've personally been engaging with dealers across the country, and their inputs and feedback has been quite unanimous and unambiguous. Mavish, you guys have the best product and the product portfolio, the fact that we have scooters, motorbikes and Shakti. And, you know, the dealers obviously understand the local nuances of auto retail, so they feel very, very confident. So we will actually be announcing the first set of dealerships go live with shops already set up on Janmarshmi, which is early next month. And looking forward to having meaningful scale before the Diwali season hits. I feel very confident that that will bring a lot of increased top-line growth from where Q1 base is. Further ahead, you know, we can get a very strong uplift from getting the best dealers to work with the company. Those are my comments on top of what Deepak said. Just underlining, summarizing that good quarter, good bounce back from Q4. Gross margins for us are targeting around the 30-32% mark, which is where we want it to be, and OPEX continues to improve structurally. So with that, I'll open up for questions.

Thank you, Bhavish. Thank you, everyone. We'll take the first question from Mr. Rishi Vohra from Kotak Security. Please unmute yourself and ask the question. Hi, Rishi.

Yeah, hi, hi, Bhavesh. Good evening. Just a couple of questions on the results and the strategy going forward. Just first on the results, why there was a very sharp decline in the ASP on a sequential basis? So, is this the product mix or something else that is driving? Rishi, lastly, it's a product mix.

I would put 90% of it to product mix.

And so going forward, this is where it should be? Or do you think there can be an improvement as a motorcycle portfolio kind of ramps up?

So actually, we are seeing an improvement in the product mix already from what we saw. So our premium business is also starting to grow again as overall the brand has grown from where Q4 was. And motorcycle is also starting to grow in the northern plains. So, I don't want to hazard a forecast on product mix, but overall, I just want to say that it'll be in the, you know, plus-minus 5% is where it'll be. Understood.

And in terms of volumes, in 1Q, we did roughly 40-45,000. So is there any guidance you would like to share for a full year? Sequentially, you are talking about improvement. So how do you want to exit at least going into the fourth quarter with dealership onboarding and maturing of the products which you have already launched?

So, Rishi, we will not give a guidance or a forecast, but I'll tell you what approach we are following. So, our focus is to keep growing from here on a disciplined level. Our gross margins are best in the industry, and our operating cost structure, especially for a vertically integrated business model, has become quite competitive now. So, our focus is to keep, from where we are, keep growing in a disciplined way. Now, how much will that result in quarter-on-quarter? I don't want to hazard guidance, but I do feel confident that there will be steady growth looking ahead.

Understood. And just on the cell piece, so have we started using our own cells in our vehicles? What would be the, if yes, what would be the penetration? And also, if you could comment on Ola Shakti, you know, where we are in terms of, you know, revenues, any scale-up that has happened on the Ola Shakti side of things.

So our cells are already in our products, Rishi. A few thousand of them are on the roads already. In Q1, we decided to pause cell production to get the next phase installation complete, which is, you know, from 2.5 to 6. So, 2.5 was already installed. We produced a few hundred thousand cells, which are in production in our vehicles on the roads to customers. We have a backlog of our own cell production needed to go into Shakti as well as our auto products, which is where we needed about two to three months of zero production time to finish the installation of the remainder of the capacity, which is now getting done sometime this month. Most likely in a week, 10 days, it will be largely done. And then we will ramp up production of our cells again. So the forecast going forward is that about... Three of our vehicle products out of, I think, about 9 or 10 SUVs have the 4680 cell in them. They will continue to get scale as we start ramping up production with the full 6 gigawatt hour company. And on Shakti, we will be announcing the Shakti Gen 2 on 15th August, which will be with LFP cells. Shakti Gen 1 was with NMC cells. And with NMC, we decided that we just wanted to put out enough so that we learn about the category, but not really scale too much because as you can understand, NMC is costlier than LFP and gross margins on that Shakti will not to the target level. With Shakti Gen2, which is with LFP cells, our gross margins are going to be actually even healthier than our auto segment, and that gets announced on 15th August. So on 15th August, actually, we'll be sharing more details about Mahashakti, about Shakti, as well as other formats of Shakti, which will go into the CNI space, commercial and industrial space, including data centers, etc. So all of that gets rolled out starting this quarter.

But was there any meaningful contribution of Ulla's Shakti this quarter in terms of revenue?

No. Again, we delivered a few hundred and then we decided not to scale up the NMC-based Shakti, but to pivot to the LFP-based Shakti. And another good news in that direction was in this quarter, our LFP cell got BIS certification also. So our LFP program proceeds very, very well.

Understood. And just last two questions. One is, what is the capex plan for this year? How much we have incurred in 1Q? And secondly, why depreciation also was down on a sequential basis? So, like, was there any write-off which were taken, which led to this decline in depreciation?

So, Rishi, our capex is, if you can see in our auto business, there's hardly any capex now. And you can see in this quarter also our free cash flow and operating cash flow is pretty much, there's no gap, right? So Auto does not need any capex for the foreseeable years, because our factory is scaled up to a million units a year already, and not just million units, but it's a vertically integrated factory. So we can really produce for a while. Our cell factory also is finishing its capex cycle this quarter with six gigawatt are installed. We don't foresee any more capex. After that, and even that, capex is all funded through debt. The equity contribution is largely done. So no more capex for the foreseeable future is my guidance to you guys. On depreciation, we have evolved a little bit of our depreciation policy in sync with the industry standards. There were some areas where we were depreciating very aggressively. We just brought that to industry standards. That's the 1020 crores delta EC.

And sorry, again, just clarification on the KPEX, there would be also some bit of R&D you would be capitalizing, right? So any R&D targets which you will be sharing?

No targets, Rishi, and we'll capitalize a minority of our R&D spends, not a large part. Understood.

But any quantum, overall, just last instance, any quantum on the KPEX?

Sorry to disturb, Rishi. In the interest of time, we will be taking questions from the rest of the participants. Thank you, Rishi. We will take the next question from Mr. Akshay Satija from Alpha Invesco. We request you to kindly unmute yourself and ask your question.

Hi, Akshay.

Hey, Bavish. Hi. Thank you for the opportunity and congratulations on lowering the costs. Bavish, what I wanted to understand more is on the sell side. So I wanted to understand what would be the LFP side of the business? What would be towards the NMC? Is there any clearance like we've decided for this?

Akshay, good question. As we see ahead, a large part of our business will be LFP. Almost all of Ola Electric's auto business will move to LFP soon enough. Again, hold on till the end of the month. We will have some good announcements there. NMC, in our auto business, about 20% of our portfolio will be NMC-based, which will be higher performance or higher, the top end of the range will be NMC-based. Otherwise, everything else will move to LFP. All of Shakti and Mahashakti, which is the energy storage business, will be LFP-based. NMC will also be relevant for some niche categories like drones, etc., where people have already shown a lot of interest in our NMC cell, and many of them are actually trialing it out, and we will talk about that soon.

Okay, okay. Yeah, and then we had, we earlier had plans of scaling the capacity up to 20 gigawatts, so just want to confirm, is it still on the cards or what are we thinking on those terms?

So the plan there is 6 gigawatt hour will be the cylindrical capacity, 6 to 20 will be prismatic. Our R&D on our prismatic cell is already underway and expected to complete by end of this year. At that point, we will aim the scale from 6 to 20, but only by getting equity into the cell company. We will not use any parent entity equity to go from 6 to 20. We will raise separate equity for that at the right time.

Okay, and that we plan to do in 28, 29, any?

No, no, 27. In 27, we will first raise everything on scale to 57.

Okay, okay. And could you also throw some light on what yields we saw on the capacity when we actually brought it down, we stopped it for a few periods? What yields that we saw? Because what I believe is it is only commercially viable if we can produce at 90% or higher yields.

So, actually, our yields are in the, let's say, high 70s or 80% range when we paused it. There is a clear roadmap to go from there to 90 plus percent within a quarter of restarting it, which is when, you know, later this month we will restart production after the full installation is done.

Okay, and we can see numbers from battery business from Q3 onwards. Is that what you're saying, right?

Yes, absolutely.

Okay, okay. And on the scooter business, we still see some service issues in terms of availability of parts. Just want a broad understanding from you. What is it that's caused that problem? Is it vendor side or the numbers not going in certain amount? Just want to understand perspective and pictures from your side on that.

See, most of the service challenges are now behind us, Saksha, and you're right. It was largely linked to availability of parts, not really a very large need for service. But whenever parts were needed, they were in less supply, especially a few critical parts where we did have some vendor challenges, including the challenges linked to the macro geopolitical situation. So we are navigating that. There are no challenges which are material on part supply chain, but there are a couple of things which we monitor very closely on part supply. Now, going forward with the dealer model, the difference will be that the dealer will actually just stock the parts and buy it from a cash and carry basis. So, that challenge will be much lesser there for the dealer side of the sales network.

Correct. And when you say vertically integrated for the scooter business, could you specify a little more in terms of what all is manufactured? So, motors, MCUs, BMS?

Yeah, some electronics, motors. The frame, the paint, the battery pack, the wiring harness, a lot of the fabrication, etc. All of this is done in house.

Okay, okay. Perfect, Mavish, I have answered my questions. Thank you so much for the explanations.

Thank you, Akshay. We'll take the next question from Mr. Purvesh Patel from Akasha Capital. We request you to unmute yourself and kindly ask the question.

Good evening. Sir, can you tell what is the expected timeline of transitioning to in-house manufacture itself for the entire coal-electric portfolio?

Purvesh, we have not put anything publicly out there, but like I said, Yeah, let's assume by the end of this year, most of our vehicles will be on ourself, but I don't want to really give a very hard guidance on that.

Thank you. Thank you so much, Purvesh, for the question. We'll wait a couple of minutes.

I think Rishi has a follow-up, so we can finish Rishi.

Sure. Rishi, if you have a follow-up question, we'd love to take your questions. Hi, Rishi. We request you to unmute yourself and ask the question.

Yeah, sorry. I was muted from your side. Just two things from my side. Again, just clarification on the KPEX. While you said that there is hardly any KPEX, but any number, like it would be 100 crores, 200 crores for this year, which you will be doing, or it even won't be to that extent.

So Rishi, except for this cell project, which is just getting done, beyond that, KPEX will be maybe 30 to 50 crores. 50 crores, you can take a target number.

Understood. And just on the sell side of things, so when you said that from third quarter, we'll start seeing contribution. So obviously, one piece is where we'll be internally using it in our own sales from Shakti also in the market with the LFP sell.

And we will also see, hopefully, I think either Q4 or Q3, we will start seeing some early revenue from Nahshakti also.

Understood. So, that you will be commencing supplies to excess energy or it's somebody else?

I won't be able to share that on this call.

Understood. And just on the dealership, right? So currently, can you just help us with like how many touch points we have and let's say by festive or by end of 3Q, how many dealers we would like to appoint, you know, as a new strategy and just at a higher level, why, you know, what prompted us to change our go-to strategy, you know, from company-owned dealership to. You know the answer to that.

I know, but I will still engage you in answer. See, the auto retail obviously has a lot of local nuances. We've also learned that along the way. The way we started as a brand would not have been possible with a dealer-only channel outreach because you followed us very closely. We had a very strong start to our journey. It's a five-year-old company only. But that said, as scale happened, and by the way, we still have the largest number of cumulative eVs sold in the country. So we have the largest customer base even today. So, as we scaled, we realized that the local nuances of auto retail, customer engagement, the servicing, etc., management of the shop, a dealer can do much better at scale. So, hence, we pivoted. The strategy now is that company stores will become more like experience centers. So, you can imagine bigger, higher quality of resources. That kind of stores, and hence, over time, fewer in number, and dealer stores will become the backbone in terms of volume and transaction and service, etc. So that's now the way we are thinking of growing. We've gotten phenomenal interest, Rishi, last two days that we've publicly announced it, and even before that, that we've been engaging with about 20, 30 dealers for about a month now. We have got almost a thousand people interested in talking to us. It's more than actually that our team can process right now. So, our goal is to select good ones, high-quality ones. We've also, by the way, gotten back B.V.R. Subbu, who used to be a board member before we went public, and he's even then been engaged with the company. So, he understands all the key dealer ecosystem people. So, he is actually helping us select the right people. It's a matter of selection, actually, for us right now. The proposition for dealers is very, very strong, as they say it and as we are engaging with them. Firstly, we have a very large customer base, and dealers really believe in service revenue. So, and if you can see, we have a large number of EV two-wheeler vehicles out of warranty period also, the three-year warranty period. All our general vehicles are out of warranty. So, dealers find a lot of potential in that. Second, our product portfolio is the broadest. We have scooters, both premium and mass. We have motorbikes, and we have Shakti also. And we have a few upcoming products, which we have shared in confidence with some dealers. So the product portfolio for them also is very strong. And we are not a new brand, which is not known. And hence, dealers find strength and value in that also, that Ola is a very well-known brand. And, you know, obviously, there are questions that, oh, has the brand in the last few quarters been... Obviously, it has been lower, but they also see the resurgence. And the really good dealers see the strong product pull that our brand has. And the challenge on service, obviously, the dealer feels that they can address it much better. So we feel it's a very strong path ahead, a very relevant pivot. And in the overall scheme of things, I think this will end up making meaningful difference to both our scale over the next few months, but also industry penetration.

And sorry, any numbers you would like to share? Like today, we have around 500 touchpoints, if I'm not mistaken. And like any target you have for dealership counts by the end.

We won't be sharing a number, Rashi. But I said, through my comments, I said that the first bunch will go live on Jalmashmi, which is, I think, 4th September.

Understood. And just lastly, on this Ola Shakti, is there... Because we would be selling it through our own, you know, experience centers and dealers, but is there any different go-to strategy, go-to market strategy you are thinking about? Because it's more distributor-led sales that happens, right? So is there any thought process?

So we are doing, with Ola Shakti, from day one, we have been and we will increasingly, as we scale supplies, we will do the multi-channel strategy. It will go through our own company stores. It will go through our automotive dealers also. And there are other industry-specific channels for that kind of inverter or battery business as the typical parlances. And we are signing up the traditional channel also for that.

Okay, thank you so much.

We've learned to maximize channel strategy.

Thank you, everyone. In the interest of time...

Actually, no. So, we'll take Udet's question. Udet is a person I know. Udet, do you have a question to ask?

Good evening, Bhavish. And hi, congratulations to you and the entire ULA Electric team on the Progress this quarter. My question is on the recently announced Axis Energy Partnership. While the MOU is an exciting validation of ULA's energy ambitions, could you help investors understand the scale of the opportunity? And how should we think about the revenue potential commercialization timeline And the broader pipeline for similar enterprise partnerships over the next few years.

No, good question, Adit. I believe the energy storage opportunity is going to be massive for India and for our company also. See, my own, actually, the CEA estimate, the government body, the CEA report had an estimate of 400 gigawatt hour in about five, six years, I guess. I think that's an underestimation of what India will need. Energy storage will be deployed across the grid level, home level, everywhere. Energy storage is going to be everywhere. We have a very strong advantage in terms of coming to market with a vertically integrated product early enough, and our engineering strength really helps us deliver a good proposition to customers there. You know, the customers there care about things that a high-quality engineered product like ours can deliver. For example, our product will have better round-trip efficiency because all the automotive technology that we have used to optimize range, and you know that our range by far is the best for the same kilowatt-hour battery pack.

Absolutely.

Software, the wiring harnesses, everything we are bringing into Maheshakti also, so the round-trip efficiency will be a few points higher than what industry offers. Safety is another paradigm. Our safety will be higher. How much energy put into one container? I think industry standard right now is five megawatt in the container. I don't want to take the thunder away from 15th August, but ours will be higher than that. So we are very confident of our proposition and the market is going to be immense.

Yeah, that's great to hear. The other question is in regards to Roadster. Just wanted to understand what is the total contribution of Roadster bike in your total revenue? And I mean, the total count of vehicles sold.

So, with that, Roadster is for us still a minority contribution, a small minority still, scooters still do majority. See, Roadster wants, we've gotten good response to the product. People are really interested in the higher range product, which is a 9.1 kWh. We haven't been able to supply enough because of the 4680 supply cell shortage because we want to finish the installation. So even in this quarter, if you see our orders to our deliveries were slightly lower because the 4680 vehicles will need to get delivered over the course of this and the next quarter. But as the availability of the higher range roadster increases, I think vehicle will really start adopting motorbikes.

Okay, yeah, those were my two questions. Thank you so much.

Thank you. With this, we come to the conclusion of the session here. We appreciate your time and all of your questions during the call today. Thank you so much for joining us and we look forward to meeting all of you during our next learnings conference call. You may now log off the conference call. Good evening.