Fundamental Analysis of Olectra Greentech: The electric vehicle (EV) push in India opens a plethora of business opportunities across mobility, infrastructure, and energy. Businesses like charging stations, battery recycling, EV manufacturing, and many more have gained momentum in the past few years. EVs have lower running costs, tax and financial benefits, are easy to drive and quiet, have a spacious cabin and more storage, and do not emit pollutants.
Globally, people are increasingly adopting EVs in place of traditional vehicles. Many companies have scaled their business and this brings an opportunity for investors, especially those who want to remain invested in stocks for a period of more than five to ten years. One such company that comes to mind is Olectra Greentech. In this article, we shall do a fundamental analysis of Olectra Greentech. We’ll take a look at its business, industry, competitors, and more.
About the Company
Olectra Greentech Limited is India’s largest Pure Electric Bus Manufacturer, headquartered in Hyderabad. It manufactures composite polymer insulators and electrical buses. After finding success in the electric bus industry, the company is expanding its product line in the e-mobility segment for 3-wheeler electric autos and electric trucks.
Manufacturing
The company manufactures seven-meter, nine-meter, and twelve-meter models of air-conditioned electric buses in India. It has manufacturing facilities located in Hyderabad with a manufacturing capacity of 1500 units per year. In fact, it was one of the largest manufacturers of e-buses in India during H1FY23 (first half of FY23). The Company has a cooperation agreement with BYD Auto Industry Co Ltd, for the assembly, manufacture, sales, marketing, and after-sales service of Electric Buses in India.
Order Book
The company has a healthy order book for supplying 3328 E-buses as of June 2022, out of which 1,125 E-buses orders are received under the FAME II scheme. These buses are to be supplied over a period of 12-15 months. The order book also includes 2100 buses worth ~Rs. 3675 crore from Brihanmumbai Electric Supply and Transport Undertaking (BEST) which is currently under litigation. Further, it bagged an order for supplying 100 electric buses worth ₹ 151 crores to the Assam State Transport Corporation, in September 2022. The buses will be delivered over a period of nine months, and maintenance will be taken care of for the next five years by Olectra Greentech.
Competitors
Traditional players are already in the market, however, new players are gaining a higher market share. Olectra Greentech has consistently been in the top three players in terms of market share. It has a market share of 28% followed by Ashok Leyland/Switch Mobility (16%), JBM Auto (15%), PMI Electro Mobility (28%), Tata Motors (11%), and others (1%, as of H1FY2023), as far as e-buses are concerned.
Industry Overview
The penetration of e-buses is less than 10% in most countries, except for China, which has a penetration of 26%. In India, the penetration of e-buses is 4%, with over 1176 buses sold. The penetration of e-buses is increasing across markets on the back of stricter climate controls.
EV Mobility
Electric Vehicle (EV) Mobility has a major role in shaping the auto industry in the near future. The Indian automobile industry is the fifth largest in the world and is slated to become the third largest by 2030. As per India Energy Storage Alliance (IESA), the Indian EV industry is expected to expand at a CAGR of 36%. India imports close to 80% of its crude oil requirements. Therefore, the demand for EVs will be on the rise, as the demographics change. India’s think tank, the NITI Aayog aims to achieve EV sales penetration of 70% for all commercial cars, 30% for private cars, 40% for buses, and 80% for two and three-wheelers by 2030. This is in line with the goal to achieve net zero carbon emissions by 2070.
Insulators
India is the third-largest producer and second-largest consumer of electricity in the world. As far as insulators are concerned, the Indian energy market is expected to grow at a Compound Annual Growth Rate(CAGR) of more than 3% during the period of 2022- 2027. Factors such as population growth in India are a strong propeller for the power market. Urbanization in the country will also have significant implications on the trend of energy consumption because of the increase in demand from industries that use energy for construction and manufacturing.
Government Initiatives
The government of India has been at the forefront of framing policies related to EV adoption in the country.
FAME India Scheme
The government had allocated ₹ 895 crores under FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles). This investment was increased to a whopping ₹ 10,000 crores in FAME-II. Another support policy is an outlay of ₹ 105 crores for the purchase of electric vehicles for mass transportation, under the Smart Cities Mission 2015. Higher subsidies of 35 to 55 lakh per bus and a subsidy cap of 40% of the vehicle cost will help to adopt e-buses under FAME 2.
PLI Scheme & Battery Swapping Policy
The government introduced the Production Linked Incentive (PLI) for Advanced Chemistry Cell Battery Storage (PLI-ACC) scheme. In addition, it has a battery-swapping policy in place. Battery swapping involves exchanging discharged batteries for charged ones. This solves the problem of charging vehicles periodically and helps to cover longer distances.
Olectra Greentech – Financials
Revenue & Profitability
| Year | 2018 | 2019 | 2020 | 2021 | 2022 |
| Revenue (₹ in Crores) | ₹161.49 | ₹170.11 | ₹200.52 | ₹281.38 | ₹593.26 |
| Profit (₹ in Crores) | ₹8.89 | -₹15.81 | ₹13.53 | ₹8.07 | ₹35.36 |
| Net Profit Margin | 5.51 % | – 9.3 % | 6.75 % | 2.87 % | 5.96 % |
The company’s revenue, as well as profits, show an increasing trend. Its sales grew at a 3-year CAGR of 51.65%. In addition, its net profit margin has been showing an increasing trend. It grew from 5.51% in the financial year 2017-18 to 5.96% in the financial year 2021-22.
The company in FY22 derived 82% of its revenue from Electric Buses and 18% from composite polymer insulators. A major concentration risk that the company faces is that its top two or three customers account for more than 50% of its revenue as of March 2022.
Fundamental Analysis Of Olectra Greentech – Key Metrics
| Particulars | Values | Particulars | Values |
| Face Value (₹) | 4 | ROE (%) | 4.66 |
| Market Cap (₹ in Cr) | 4,398.71 | Net Profit Margin | 5.96% |
| EPS (₹) | 6.66 | Current Ratio | 2.37 |
| Stock P/E (TTM) | 80.29 | Debt to Equity | 0.09 |
| Dividend Yield (%) | 0.06 | Promoter’s Holdings (%) | 50.02 |
Olectra Greentech is a small-cap company with a market capitalization of ₹ 4,398.71 crores as of December 2022. It has earnings per share of ₹ 6.66, indicating that ₹ 6.66 is allocated to every individual share of the stock. A high EPS indicates good profitability. Its shares were trading at a price-to-equity ratio (P/E) of 80.29 which is significantly higher than the industry P/E of 40.03. This could mean that the company’s stock is overvalued as compared to its peers.
Return Ratios
The company has a poor return on equity of 4.66%. This indicates that the company generates a good amount of profit on the equity that is employed in it. Further, it has a return on capital employed of 7.73%, indicating that it generates ₹ 7.73 for every ₹ 100 that is deployed in its business.
Debt & Liquidity Ratios
Olectra Greentech has an ideal debt-to-equity ratio of 0.09. Further, it has a current ratio of 2.37. This indicates that its current assets are more than twice its current liabilities. It has a dividend yield of 0.06. The company has a credit rating of BBB+ positive outlook from ICRA, and a BBB+ stable outlook from IND ratings.
Shareholding
The company’s promoters hold a 51.74% stake in it. Retail investors hold a 39.54% stake, FIIs hold 10.41% and DIIs hold 0.03%. Further, there is no pledge against the promoters’ holding. The promoters’ stake has decreased from 51.75% in September 2021 to 50.02% in September 2022. However, FIIs have increased their stake in the company from 8.65% to 10.41% during the same period. This is a positive sign.
Future Plans of Olectra Greentech
The company is setting up a new greenfield plant with a capacity of 5,000 units per year and scalable up to 10,000 units per year. It has acquired 150 acres of land in Hyderabad for this purpose. The new plant will result in an expanded capacity of 5,000 electric vehicles per year, scalable up to 10,000 electric vehicles per year. The company has started trials of the E-tipper which is expected to be launched in the near future. It plans to enter into staff transport and is already working on strengthening the inter-city/ inter-state private transport segment. It plans to establish TARMAC buses in airports.
In Closing
In this article on the fundamental analysis of Olectra Greentech, we took a look at the company’s business, the industry that its functions, and its competitors. Later we took a look at financial metrics like revenue, profitability, ratios, and shareholding. That’s all for this article folks. We hope to see you around and happy investing until next time.
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