Ola Plans ₹2,200 Crore Capex in FY25 for Cell Manufacturing Expansion.

Ola Cell Technologies Pvt Ltd (OCTPL), a wholly owned subsidiary of Ola Electric Mobility Ltd (OEML), is set to invest over ₹2,000 crore this fiscal year to expand its lithium-ion cell manufacturing capacity. The facility, located in Krishnagiri, Tamil Nadu, has already seen an investment of ₹1,200 crore as of September 2024, establishing a 1.4-GWh manufacturing capacity under Phase 1(a).

Progress and Certification

The lithium-ion cells produced at the facility have received BIS certification and are currently in the homologation phase for use in Ola’s electric vehicles. OCTPL plans to integrate these cells into its electric two-wheelers by Q1 FY2026, with production volumes expected to scale up thereafter.

Expansion Plans

In its Phase 1(b) expansion, OCTPL aims to increase manufacturing capacity from 1.4 GWh to 5 GWh. The company’s long-term vision includes scaling capacity up to 20 GWh in subsequent phases. To support this expansion, OCTPL has allocated ₹2,200 crore for capital expenditure in FY2025, funded through a mix of debt and equity. Additionally, proceeds from the parent company’s IPO will help boost capacity to 6.4 GWh, according to a report by ICRA.

Financial and Operational Outlook

ICRA has revised OEML’s outlook from stable to negative due to increasing competition and a slower-than-expected trajectory to profitability. Despite this, OCTPL’s liquidity remains robust, supported by periodic fund infusions from its parent company and an undrawn term loan of approximately ₹1,288 crore as of September 2024. As of September 30, 2024, the company held unencumbered cash and liquid investments of around ₹1,335 crore, bolstered by funds raised through OEML’s successful IPO.

Benefits Under the ACC-PLI Scheme

OCTPL’s 20 GWh battery unit has been granted benefits under the government’s ACC-PLI scheme, making the company eligible for subsidies based on annual value addition over five years starting FY2025. While the company’s ability to meet production and domestic value addition targets remains to be seen, the subsidies are expected to enhance the project’s return metrics in the medium term.

Market Position and Long-Term Prospects

With strong medium- to long-term demand for electric vehicles (EVs) in India, OCTPL is well-positioned as one of the early entrants in the country’s lithium-ion cell manufacturing sector. As a captive manufacturer for the Ola Group, the company stands to benefit from India’s growing EV market, bolstered by government initiatives to accelerate EV adoption. OCTPL’s efforts align with a broader trend of domestic auto OEMs and ancillary firms investing in local vendor ecosystems to support the EV industry’s growth.

HBL