Ola Electric eyes redemption after $5 billion stock rout

Ola Electric Mobility Ltd.’s shares are recovering from a $5 billion rout as investors bet the Indian electric two-wheeler maker is turning a corner.

After hitting a record low in July, the stock rebounded 31% in August in its biggest monthly rally since last year’s much-hyped listing. Ola Electric’s unveiling of its locally developed lithium-ion cell battery and government incentives for newly-introduced scooters are helping to push the shares higher.

The upturn offers a glimpse of redemption for investors burned by Ola’s post-debut slump. Even with August’s surge, the stock remains down more than 60% from a peak reached shortly after its initial public offering. A litany of setbacks, including instances of its scooters catching fire and shrinking market share, have damped sentiment.

Ola is likely to retain market share as electric scooters become more popular and the upcoming festive season provides a potential sales boost, Arihant Capital Markets Ltd. analysts wrote in a note. The firm’s goal to expand its gigafactory and develop in-house cell technology could position it as a “credible global alternative to Chinese manufacturers that dominate the supply chain,” they added.

Investment managers including Mirae Asset Financial Group and Helios Capital Asset Management have increased stakes in recent months, signaling optimism for the stock. Still, sell-side analysts remain cautious—of the seven brokers tracking Ola, three have sell calls, while two recommend hold, according to data compiled by Bloomberg. Their average target price also points to a 14% decline in the next 12 months.

“Investors will be closely watching Ola’s performance in coming quarters, especially its ability to generate positive cash-flow,” independent analyst Avinash Gorakshakar told Bloomberg. “The company’s ability to lead India’s EV ecosystem is well established and it needs to deliver its promise now.”