Sunday, July 14, 2024

Ola Electric Plans Layoffs to Cut Costs Before IPO

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Bengaluru-based electric vehicle manufacturer Ola Electric is planning to lay off around 400-500 employees in the upcoming weeks. This move aims to reduce operating costs as the company prepares for its initial public offering (IPO).

Layoff Details

According to a report by The Economic Times, the exact number of layoffs has not been finalized yet by Ola Electric’s leadership team. In April 2024, Moneycontrol reported that Ola Cabs, a subsidiary of Ola Electric, might lay off 10% of its workforce as part of a restructuring exercise. Around the same time, Hemant Bakshi, CEO of Ola Cabs, resigned from the company.

Ola Founders Bhavish Aggarwal and Ankit Bhati

Impact Across Various Teams

The layoffs at Ola Electric are expected to affect various departments within the organization. Some of the impacted employees might be replaced by new hires at lower costs, but the overall workforce is expected to decrease. A source from the company mentioned, “Inside, they are finalizing the list across different teams. Three-four teams have already finalized the numbers, but the cuts would be across the organization.”

Financial Performance

Ola Electric reported a net loss of Rs 1,472 crore for the fiscal year 2023, with operating revenue of Rs 2,631 crore. In the first quarter of fiscal year 2024, the company posted a net loss of Rs 267 crore on operating revenue of Rs 1,243 crore. When filing its draft IPO papers in December, Ola Electric had 3,733 employees as of October 2023, with an employee attrition rate of 47.48% in FY23.

OLA electric electric bikes and scooters.

Rising Competition

Despite the layoffs, Ola Electric continues to be a leader in India’s electric scooter market. In May, the company sold over 37,000 scooters, securing a 50% market share. However, the electric scooter market is becoming increasingly competitive. Legacy players like TVS Motors and Bajaj Auto are expanding their market presence. Additionally, there has been a recent downturn in demand for electric two-wheelers, affecting many companies in the sector.

Competitors’ Moves

Recently, Ather Energy, a top competitor of Ola Electric, raised Rs 286 crore (about $34 million) through a mix of debt and equity. Stride Ventures, a New Delhi-based venture debt firm, invested close to Rs 200 crore via debentures, while Ather Energy’s co-founders, Tarun Sanjay Mehta and Swapnil Jain, contributed Rs 43.28 crore each through Series F preference shares.

Ola Electric’s planned layoffs are a strategic move to reduce costs ahead of its IPO. The company faces increasing competition and financial challenges but remains a dominant player in the electric scooter market.

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