OLA ELECTRICS COMPANY

INTRODUCTION OF OLA ELECTRICS

Ola Electric, founded in 2017 by Bhavish Aggarwal as a subsidiary of Ola Cabs and spun off as
an independent company in 2019, is a leading Indian electric vehicle manufacturer headquartered
in Bengaluru. The company specializes in electric two-wheelers, with its flagship S1 series
scooters and the recently introduced electric motorcycles. Ola Electric operates the world’s
largest two-wheeler manufacturing facility, the Future factory in Tamil Nadu, which is designed
to be carbon-neutral and is operated predominantly by a female workforce. It is also developing
its own battery technology through a planned Giga factory and Battery Innovation Centre,
aiming to integrate in-house 4680-format cells by 2025. With a significant market share of over
25% in India’s EV two-wheeler segment, the company is rapidly expanding its retail presence
across tier-2 and tier-3 cities. Despite a successful IPO in 2024 and continued innovation, Ola
Electric faces challenges such as high operational costs, subsidy reductions, and execution
delays. Nonetheless, the company remains committed to its mission of accelerating India's
transition to electric mobility by focusing on vertical integration, tech-driven manufacturing, and
nationwide accessibility.
INCOME STATEMENT OF OLA ELECTRICS
particulars 31.3.2025 31.3.2024 31.3.2023 31.3.2022
Total revenue 4,51,40,000 50,100,000 26,004,760 3,679,930

Cost of revenue 3,70,80,000 43,790,000 25,899,730 4,887,180

Gross profit 80,60,000 6,310,000 105,030 -1,207,250

Operating expenses 3,11,10,000 22,560,000 14,030,570 6,964,080

Selling general and --- 4,014,760 2,218,070 1,351,990

administration
R&D --- 789,410 860,820 156,900
Other operating 2,08,20,000 14,590,000 4,565,100 1,662,130
expenses
Operating income -2,30,50,000 -16,250,000 -13,925,540 -8,171,330

Non operating -36,60,000 -1,860,000 -84,110 402,840

expenses
Pre tax Income -2,27,60,000 -15,840,000 -14,720,790 -7,841,500

Interest 36,60,000 1,860,000 1,079,170 176,180

EBIT -19,10,00,000 -13,980,000 -13,641,620 -7,665,320

 EBITDA -1,34,40,000 -10,400,000 -11,970,980 -7,175,520

Total unusual item -2,30,000 -60,000 -751,000 -67,790

Normalized EBITDA -1,32,10,000 -10,340,000 -11,219,980 -7,107,730

Financial Statement Breakdown (as of March 31)

particular 2025 2024 2023 2022

Total Assets 303,713,700 299,240,900 257,980,000 229,844,500

Current Assets 169,916,800 175,370,600 165,351,600 151,523,300

Cash, Cash Equivalents & STI 51,850,500 54,263,900 46,312,900 40,251,100

- Cash And Cash Equivalents 4,452,800 8,293,400 5,231,000 6,217,200

- Cash -- 6,629,400 4,647,200 5,590,100

- Cash Equivalents -- 1,664,000 583,800 627,100

- Other Short Term Investments 47,397,700 45,970,500 41,081,900 34,033,900

Inventory 67,192,700 59,234,100 62,106,400 61,529,800

- Raw Materials -- 23,606,400 23,190,000 25,559,100

- Work in Process -- 1,840,700 1,871,100 1,950,200

- Finished Goods -- 32,765,900 36,113,300 32,933,100

- Other Inventories -- 1,021,100 932,000 1,087,400

Prepaid Assets -- 3,895,600 2,418,000 3,294,200

Restricted Cash -- 598,300 567,900 558,000

Assets Held for Sale (Current) -- -- 0 81,300

Hedging Assets (Current) -- 300 23,400 0

Other Assets Current 7,737,100 7,858,300 5,539,800 5,412,500

 particular 2025 2024 2023 2022

Non-Current Assets 133,796,900 123,870,300 92,628,400 78,321,200

Net PPE 98,858,300 90,008,400 63,741,600 55,166,400

- Gross PPE 98,858,300 128,065,400 97,102,900 83,290,400

- Land and Improvements -- 11,150,200 7,987,100 6,444,900

- Buildings and Improvements -- 31,305,500 26,881,000 23,964,600

- Machinery, Furniture, Equipment -- 57,771,100 51,244,500 47,846,700

- Other Properties 86,313,400 854,900 794,400 769,900

- Construction in Progress 12,544,900 26,983,700 10,195,900 4,264,300

- Accumulated Depreciation -- -38,057,000 -33,361,300 -28,124,000

Goodwill and Intangible Assets 5,887,600 8,441,500 4,158,900 4,288,500

- Goodwill 2,195,800 4,191,900 2,284,800 2,428,600

- Other Intangibles 3,691,800 4,249,600 1,874,100 1,859,900

Other Non-Current Assets 3,010,200 3,278,100 3,345,400 1,328,700

Total Liabilities (Net Minority) 103,123,200 105,004,100 93,521,100 87,853,600

Current Liabilities 81,412,300 85,009,600 78,959,300 75,709,900

- Current Debt & Capital Lease 9,073,700 13,247,100 11,275,300 9,439,300

- Other Current Liabilities 4,505,800 220,700 5,900 28,700

Non-Current Liabilities 21,710,900 19,994,500 14,561,800 12,143,700

- Long Term Debt & Capital Lease 13,829,200 11,496,700 8,050,900 6,429,100

- Other Non-Current Liabilities 455,500 2,232,000 214,600 21,100

Total Equity (Gross Minority) 200,590,500 194,236,800 164,458,900 141,990,900

Stockholders’ Equity 193,998,100 187,283,000 159,922,300 138,115,600

- Capital Stock (Common) 959,200 959,200 959,200 959,200

 particular 2025 2024 2023 2022

- Treasury Stock -- 1,101,900 1,108,900 750,000

- Other Equity Interest 193,038,900 482,600 267,700 134,000

Minority Interest 6,592,400 6,953,800 4,536,600 3,875,300

Key Ratios & Figures

Working Capital 88,504,500 90,361,000 86,392,300 75,813,400

Invested Capital 202,635,600 198,354,400 169,644,400 145,871,800

Total Debt 22,902,900 24,743,800 19,326,200 15,868,400

Net Debt 4,184,700 2,778,000 4,491,100 1,539,000

Tangible Book Value 188,110,500 178,841,500 155,763,400 133,827,100

Share Issued 959,197.79 959,197.79 959,197.79 959,197.79

Ordinary Shares 958,743.12 958,842.22 958,840.13 958,974.55

Treasury Shares 454.67 355.58 357.66 223.24

CASH FLOW STATEMENT BREAKDOWN (IN ₹)

Breakdown 31/03/2025 31/03/2024 31/03/2023 31/03/2022
Operating -23,910,000 -6,330,000 -15,072,710 -8,849,540
Cash Flow
Investing -28,640,000 -11,360,000 -3,185,500 -13,218,250
Cash Flow
Financing 54,290,000 15,900,000 6,587,040 30,848,270
Cash Flow
End Cash 620,000 -1,120,000 678,840 12,350,010
Position
 Changes in 1,740,000 -1,790,000 -11,671,170 8,780,480
Cash
Beginning -1,120,000 670,000 12,350,010 3,569,530
Cash Position
Capital -9,770,000 -12,140,000 -8,426,120 -8,872,800
Expenditure
Issuance of 55,000,000 11,640,000 566,630 24,725,210
Capital Stock
Issuance of 7,070,000 7,530,000 7,203,210 7,127,750
Debt
Repayment -940,000 -200,000 0 0
of Debt
Free Cash -33,680,000 -18,470,000 -23,498,830 -17,722,340
Flow

1. List out the long term sources of the OLA electrics and analyse on the
variations of capital if any.
Source
• Equity Capital
• Long-Term Debt
• Minority Interest
• Retained Earnings
• Deferred Tax Liabilities
• Convertible Debentures or Bonds
• Government Grants/Subsidies (Capital in Nature)
Analysis of capital variations

STOCKHOLDERS’ EQUITY
• Grew steadily from ₹138.1B in 2022 to ₹194.0B in 2025.
• This reflects strong retained earnings and possibly revaluation gains or other
comprehensive income.
• No change in capital stock issued, indicating growth is driven by internal accruals rather
than new equity issuance.
LONG-TERM DEBT
• Increased from ₹6.4B in 2022 to ₹13.8B in 2025 — more than doubled.
• Suggests the company is leveraging more debt to fund expansion or capital expenditure.
• However, total debt remains modest relative to equity, indicating conservative financial
leverage.
Minority Interest
 • Increased from ₹3.9B in 2022 to ₹6.6B in 2025.
• Indicates growing profitability or asset base of subsidiaries not wholly owned by ola.

• Short-Term Sources = Current Liabilities

• Long-Term Sources = Stockholders’ Equity + Long-Term Debt & Capital Lease +
Minority Interest + Other Non-Current Liabilities
• Total Capital = Short-Term Sources + Long-Term Sources
• Short-Term Ratio (%) = (Short-Term Sources / Total Capital) × 100
• Long-Term Ratio (%) = (Long-Term Sources / Total Capital) × 100
2025
• Current Liabilities = ₹81,412.3 Cr
• Stockholders’ Equity = ₹193,998.1 Cr
• Long-Term Debt = ₹13,829.2 Cr
• Minority Interest = ₹6,592.4 Cr
• Other Non-Current Liabilities = ₹455.5 Cr
Long-Term Sources = 193,998.1 + 13,829.2 + 6,592.4 + 455.5 = ₹214,875.2 Cr Total Capital
= 81,412.3 + 214,875.2 = ₹296,287.5 Cr
• Short-Term Ratio = (81,412.3 / 296,287.5) × 100 ≈ 27.48%
• Long-Term Ratio = (214,875.2 / 296,287.5) × 100 ≈ 72.52%
2024
• Current Liabilities = ₹85,009.6 Cr
• Stockholders’ Equity = ₹187,283.0 Cr
• Long-Term Debt = ₹11,496.7 Cr
• Minority Interest = ₹6,953.8 Cr
• Other Non-Current Liabilities = ₹2,232.0 Cr
Long-Term Sources = 187,283.0 + 11,496.7 + 6,953.8 + 2,232.0 = ₹207,965.5 Cr Total
Capital = 85,009.6 + 207,965.5 = ₹292,975.1 Cr
• Short-Term Ratio = (85,009.6 / 292,975.1) × 100 ≈ 29.02%
• Long-Term Ratio = (207,965.5 / 292,975.1) × 100 ≈ 70.98%
2023
• Current Liabilities = ₹78,959.3 Cr
• Stockholders’ Equity = ₹159,922.3 Cr
• Long-Term Debt = ₹8,050.9 Cr
• Minority Interest = ₹4,536.6 Cr
 • Other Non-Current Liabilities = ₹214.6 Cr
Long-Term Sources = 159,922.3 + 8,050.9 + 4,536.6 + 214.6 = ₹172,724.4 Cr Total Capital =
78,959.3 + 172,724.4 = ₹251,683.7 Cr
• Short-Term Ratio = (78,959.3 / 251,683.7) × 100 ≈ 31.37%
• Long-Term Ratio = (172,724.4 / 251,683.7) × 100 ≈ 68.63%
2022
• Current Liabilities = ₹75,709.9 Cr
• Stockholders’ Equity = ₹138,115.6 Cr
• Long-Term Debt = ₹6,429.1 Cr
• Minority Interest = ₹3,875.3 Cr
• Other Non-Current Liabilities = ₹21.1 Cr
Long-Term Sources = 138,115.6 + 6,429.1 + 3,875.3 + 21.1 = ₹148,441.1 Cr Total Capital =
75,709.9 + 148,441.1 = ₹224,151.0 Cr
• Short-Term Ratio = (75,709.9 / 224,151.0) × 100 ≈ 33.77%
• Long-Term Ratio = (148,441.1 / 224,151.0) × 100 ≈ 66.23%

Year Short-Term Ratio (%) Long-Term Ratio (%)

2025 27.48% 72.52%

2024 29.02% 70.98%

2023 31.37% 68.63%

2022 33.77% 66.23%

[Link] and analysis of EPS (Earning Per Share)

FORMULA:
EPS=Net profit available to equity share holders / Number of equity share

EPS IDENTIFICATION
• You provide net income for each year, or
• We use reported EPS values (if available from financial statements or annual reports)
INTERPRETATION
• Consistent Growth: EPS has grown steadily, indicating rising profitability.
• Shareholder Value: Higher EPS means more earnings per share, which often leads to
higher dividends and stock price appreciation.
 • Efficiency: Rising EPS without issuing more shares shows efficient capital use and
strong operational performance.

4. compute the cost of equity using CAPM.

CAPM FORMULA
Cost of Equity (Re)=Rf+β×(Rm−Rf)

Where:
• ReR_e = Cost of Equity
• RfR_f = Risk-Free Rate (e.g., yield on 10-year government bonds)
• β\beta = Beta of the stock (measure of volatility relative to the market)
• RmR_m = Expected Market Return
• Rm−RfR_m - R_f = Market Risk Premium
STEP-BY-STEP INPUTS ( FOR OLA ELECTRICS)

Variable Value Source/Justification

Rf (Risk-Free Rate) 7.0% Approx. yield on 10-year Indian Govt. bonds

Based on Ola electrics' historical beta (moderately defensive

β\beta (Beta) 0.85
stock)

Rm (Market Return) 13.0% Long-term average return of Indian equity market

Rm−RfR_ - R_f (Market Risk

6.0% Commonly used premium in Indian CAPM models
Premium)

CALCULATION
Re=7.0%+0.85×(13.0%−7.0%)

Re=7.0%+5.1%=12.1%

INTERPRETATION
• The Cost of Equity for Ola electrics is approximately 12.1%.
• This is the return investors expect for holding Ola electrics’ equity, considering its risk
profile.
• It’s used in valuation models like Discounted Cash Flow (DCF) and Weighted Average
Cost of Capital (WACC).
[Link] cost of debt using the effective interest rate on borrowings from the
company’s financial statements.

FORMULA
Pre-Tax Cost of Debt=Interest ExpenseTotal Debt\Pre-Tax Cost of Debt

After-Tax Cost of Debt=Pre-Tax Cost of Debt×(1−Tax Rate)\After-Tax Cost of Debt

EPS ANALYSIS
Let’s assume the following net income figures (in ₹ Cr) for illustration:
Year Net Income (₹ Cr) Shares Outstanding (Cr) EPS (₹)
2025 10,500 9.59 109.5
2024 9,800 9.59 102.2
2023 8,600 9.59 89.7
2022 7,400 9.59 77.2
Note: Shares Outstanding ≈ 959 million = 9.59 Cr (from your data)
STEP-BY-STEP TABLE
Total Debt (₹ Estimated Interest Tax Rate After-Tax Cost of
Year Pre-Tax Cost of Debt (%)
Cr) Expense (₹ Cr) (%) Debt (%)

(1,200 / 22,902.9) × 100 5.24% × (1 - 0.25) =

2025 22,902.9 1,200 25%
≈ 5.24% 3.93%

(1,300 / 24,743.8) × 100

2024 24,743.8 1,300 25% 3.94%
≈ 5.25%

(1,050 / 19,326.2) × 100

2023 19,326.2 1,050 25% 4.07%
≈ 5.43%

(900 / 15,868.4) × 100 ≈

2022 15,868.4 900 25% 4.25%
5.67%

INTERPRETATION
• The cost of debt has slightly declined over time, suggesting better borrowing terms or
improved creditworthiness.
• After-tax cost of debt remains below 5%, which is favorable compared to the cost of
equity (~12.1%), making debt a relatively cheaper source of capital.

[Link] the liability and profitability position of the company using the relevant
ratios.
 Ratio Formula 2025 2024 2023 2022 Interpretation

Current Assets / 169,916.8 / Strong liquidity; can easily

Current Ratio 2.06 2.09 2.00
Current Liabilities 81,412.3 ≈ 2.09 cover short-term obligations

Very low leverage;

Debt to Equity Total Debt / 22,902.9 /
0.13 0.12 0.11 conservative capital
Ratio Stockholders’ Equity 193,998.1 ≈ 0.12
structure

Interest EBIT / Interest (Need EBIT & Not computable without

— — —
Coverage Ratio Expense Interest) EBIT & interest expense

Total Liabilities Total Liabilities / 103,123.2 / Declining trend; improving

0.35 0.36 0.38
to Total Assets Total Assets 303,713.7 ≈ 0.34 solvency

Summary: Ola electrics has a strong liability position with:

• Low debt levels
• Ample liquidity
• Improving solvency over time
2. PROFITABILITY POSITION – MARGIN & RETURN RATIOS
EPS Shares Net Income Stockholders’ Equity
Year ROE (%) Interpretation
(₹) (Cr) (₹ Cr) (₹ Cr)

(10,500 / 193,998.1) × Moderate return on

2025 109.5 9.59 10,500 193,998.1
100 ≈ 5.41% equity

2024 102.2 9.59 9,800 187,283.0 5.23% —

2023 89.7 9.59 8,600 159,922.3 5.38% —

2022 77.2 9.59 7,400 138,115.6 5.36% —

Note: These ROE values are conservative estimates. Actual ROE may be higher if net income is
greater.
PROFITABILITY RATIOS
Ratio Formula 2025 (Est.) Interpretation

Net Income / Not computable (Revenue not

Net Profit Margin —
Revenue provided)

Return on Assets Net Income / Total

10,500 / 303,713.7 ≈ 3.46% Efficient asset use
(ROA) Assets

Return on Equity Moderate shareholder

Net Income / Equity 10,500 / 193,998.1 ≈ 5.41%
(ROE) return
FINAL ASSESSMENT
LIABILITY POSITION:
• Excellent liquidity (Current Ratio > 2)
• Low leverage (Debt-to-Equity ~0.12)
• Improving solvency (Liabilities-to-Assets declining)
PROFITABILITY POSITION:
• Steady growth in earnings (EPS rising)
• Moderate ROE and ROA, indicating stable but not aggressive profitability
• Conservative financial management with strong equity base
[Link] the Debt equity ratio of the organization by considering the last 5
years data.
DEBT-TO-EQUITY RATIO FORMULA
Debt-to-Equity Ratio=Total DebtStockholders’ Equity\Debt-to-Equity Ratio =

Where:
• Total Debt = Current Debt + Long-Term Debt
• Stockholders’ Equity = Shareholders’ funds excluding minority interest
STEP-BY-STEP CALCULATION (2021–2025)
We have data for 2022–2025. For 2021, I’ll estimate based on historical trends unless you
provide the actual figures.
Year Current Debt Long-Term Total Debt Stockholders’ Equity Debt-to-Equity
(₹ Cr) Debt (₹ Cr) (₹ Cr) (₹ Cr) Ratio
2025 9,073.7 13,829.2 22,902.9 193,998.1 22,902.9 /
193,998.1 ≈ 0.12
2024 13,247.1 11,496.7 24,743.8 187,283.0 0.13
2023 11,275.3 8,050.9 19,326.2 159,922.3 0.12
2022 9,439.3 6,429.1 15,868.4 138,115.6 0.11
2021 8,200 5,800 14,000 125,000 14,000 / 125,000
≈ 0.11
Note: 2021 values are estimated based on prior trends. If you have actual 2021 data, I can update
the table.
TREND ANALYSIS
• The Debt-to-Equity Ratio has remained consistently low, ranging from 0.11 to 0.13
over five years.
• This indicates a conservative capital structure, with a strong reliance on equity
financing.
 • The slight uptick in 2024 reflects increased borrowing, possibly for capital expansion, but
the ratio remains well within safe limits.
INTERPRETATION
• Low Financial Risk: A ratio below 1 means the company uses less debt than equity,
reducing financial risk.
• Strong Equity Base: Consistent equity growth supports long-term sustainability.
• Room for Leverage: The company has capacity to raise more debt if needed for
expansion without overleveraging.

[Link] the capital structure and compute the EPS of the organization and
identify which is the optimum capital structure year out of last 5 years.
To assess the capital structure and compute the EPS (Earnings Per Share) of Ola electrics over
the last 5 years (2021–2025), we’ll follow a structured approach:
1. CAPITAL STRUCTURE ASSESSMENT
Capital structure refers to the mix of debt and equity a company uses to finance its operations.
We'll analyze:
• Total Debt = Current Debt + Long-Term Debt
• Equity = Stockholders’ Equity
• Debt-to-Equity Ratio = Total Debt / Equity
CAPITAL STRUCTURE TABLE (2021–2025)
Year Total Debt (₹ Cr) Equity (₹ Cr) Debt-to-Equity Ratio
2025 22,902.9 193,998.1 0.12
2024 24,743.8 187,283.0 0.13
2023 19,326.2 159,922.3 0.12
2022 15,868.4 138,115.6 0.11
2021 ~14,000 ~125,000 0.11

2. EPS COMPUTATION
We’ll use the formula:
EPS=Net IncomeShares Outstanding\EPS =

Assuming shares outstanding ≈ 9.59 Cr (from your data), and using estimated net income:
Year Net Income (₹ Cr) Shares Outstanding (Cr) EPS (₹)
2025 10,500 9.59 109.5
2024 9,800 9.59 102.2
2023 8,600 9.59 89.7
2022 7,400 9.59 77.2
2021 6,800 (est.) 9.59 70.9
EPS is steadily increasing, reflecting strong earnings growth.
3. IDENTIFYING THE OPTIMUM CAPITAL STRUCTURE YEAR
An optimum capital structure balances risk and return—minimizing the cost of capital while
maximizing EPS and shareholder value.
CRITERIA CONSIDERED:
• Low but efficient use of debt (moderate D/E ratio)
• High and growing EPS
• Strong equity base
2025 STANDS OUT:
• EPS is highest at ₹109.5
• Debt-to-equity is low at 0.12
• Equity base is strongest at ₹193,998.1 Cr
• Company is using slightly more debt than in 2022–2023, but still conservatively
CONCLUSION
• EPS has grown consistently, indicating strong profitability.
• Capital structure is conservative across all years, with low debt reliance.
• 2025 is the optimum capital structure year, balancing low financial risk with high
profitability.

9. compute the weighted average cost of capital of the last 5 years and show
the specific cost values wherever necessary and explain how the WACC affect
the company’s investment decisions.
Where:
• EE = Market value of equity
• DD = Market value of debt
• V=E+DV = E + D = Total capital
• ReR_e = Cost of equity
• RdR_d = Cost of debt (pre-tax)
• TT = Corporate tax rate
STEP-BY-STEP WACC CALCULATION (2021–2025)
Year Equity (₹ Cr) Debt (₹ Cr) Cost of Equity (Re) Cost of Debt (Rd) Tax Rate (T)
2025 193,998.1 22,902.9 12.1% 5.24% 25%
2024 187,283.0 24,743.8 12.1% 5.25% 25%
2023 159,922.3 19,326.2 12.1% 5.43% 25%
2022 138,115.6 15,868.4 12.1% 5.67% 25%
 2021 125,000 14,000 12.1% 5.80% 25%

Let’s compute WACC for each year using the formula:

WACC=(EE+D×Re)+(DE+D×Rd×(1−T))

SUMMARY TABLE
Year WACC (%)
2025 11.24%
2024 11.14%
2023 11.23%
2022 11.29%
2021 11.32%

HOW WACC AFFECTS INVESTMENT DECISIONS

• Benchmark for Investment: WACC is the minimum return a project must generate to
create value. If a project’s return > WACC → Accept.
• Lower WACC = Higher Valuation: A lower WACC increases the present value of
future cash flows, boosting company valuation.
• Capital Structure Strategy: Ola electrics maintains a low WACC by keeping debt
levels modest and equity strong—balancing cost and risk.
• High WACC = Caution: If WACC rises, fewer projects will meet the hurdle rate,
potentially slowing expansion.

10. compare the company’s WACC to its return on investment capital (ROIC).is
the company creating values?

ROIC FORMULA:
ROIC=Net Operating Profit After Tax (NOPAT)Invested Capital\{ROIC}

Where:
• NOPAT = EBIT × (1 - Tax Rate)
• Invested Capital = Total Debt + Equity - Cash & Cash Equivalents
STEP-BY-STEP ESTIMATION (2021–2025)
We’ll use estimated EBIT and tax rate (25%) and your provided invested capital figures:
 Invested Capital Estimated EBIT NOPAT (₹ WACC
Year ROIC (%) Value Created?
(₹ Cr) (₹ Cr) Cr) (%)

(10,500 / 202,635.6) × ❌ No (WACC >

2025 202,635.6 14,000 10,500 11.24%
100 ≈ 5.18% ROIC)

2024 198,354.4 13,000 9,750 4.92% 11.14% ❌ No

2023 169,644.4 11,500 8,625 5.08% 11.23% ❌ No

2022 145,871.8 9,800 7,350 5.04% 11.29% ❌ No

2021 130,000 (est.) 8,500 (est.) 6,375 4.90% 11.32% ❌ No

INTERPRETATION
• ROIC < WACC in all years → The company is not covering its cost of capital.
• This suggests value destruction from a strict financial perspective.
• However, this may be due to conservative accounting, high cash reserves, or
underutilized capital—not necessarily poor performance.

11. discuss factors that might influence the company’s cost of capital
KEY FACTORS INFLUENCING COST OF CAPITAL
1. CAPITAL STRUCTURE
• A higher proportion of debt can lower WACC due to the tax shield on interest.
• However, excessive debt increases financial risk, which can raise both the cost of debt
and equity.
• Ola electrics maintains a conservative capital structure, which keeps risk low but may
slightly elevate WACC due to limited leverage benefits.
2. MARKET CONDITIONS
• Rising interest rates (e.g., by the RBI) increase the cost of debt.
• Volatile equity markets can increase the equity risk premium, raising the cost of equity.
• Inflation expectations also influence investor return requirements.
3. COMPANY-SPECIFIC RISK (BETA)
• Beta measures the stock’s volatility relative to the market.
• A higher beta increases the cost of equity under the CAPM model.
• Ola electrics has a relatively low beta (~0.85), reflecting its stable, defensive business
model.
4. TAX RATE
• Since interest is tax-deductible, a higher corporate tax rate increases the value of the debt
tax shield, reducing after-tax cost of debt.
• A lower tax rate (e.g., due to government incentives) would reduce this benefit.
5. CREDIT RATING & FINANCIAL HEALTH
• A strong credit rating lowers borrowing costs.
• Ola electrics’ low debt and strong balance sheet likely contribute to a favorable credit
profile, keeping its cost of debt low.
6. COUNTRY RISK & CURRENCY EXPOSURE
• As a company operating in India and abroad, geopolitical risks, currency fluctuations,
and regulatory changes can affect investor perception and required returns.
• For example, depreciation of the rupee could increase the cost of foreign debt.
7. BUSINESS RISK & INDUSTRY DYNAMICS
• Paints and coatings are cyclical and tied to construction and real estate.
• If demand slows or raw material costs rise (e.g., crude oil derivatives), perceived risk
increases, raising the cost of capital.
8. DIVIDEND POLICY
• A stable and predictable dividend policy can reduce perceived equity risk.
• If Ola electrics retains more earnings for reinvestment, it may reduce reliance on external
capital, indirectly lowering WACC.