How an expense entry aided Ola Electric’s profitability

expenses, absent from its peers’ books, failed to impress investors.

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Cost for making two-wheelers and cells was ₹477 crore.

(REUTERS)

Since the results were announced on 6 November, the company’s stock has declined 19% on the NSE through Wednesday, compared to a 4% rise in the Nifty Auto index in the same period.

Abhishek Banerjee, founder at LotusDew Wealth, an investment advisory firm focusing on corporate governance, said that typically unallocated expenses should not cross 5% of total expenses and anything above that “will definitely raise eyebrows”.

“I think these are a combination of Esop which cannot be allocated, IT infra at group level and CXO remuneration. That said, it’s very high.” he said, adding that there are no guidelines on how high these expenses can be and company has no obligation to disclose breakup of these expenses.

Last month, Ola Electric’s founder and chairman Bhavish Aggarwal announced that the two-wheeler business had become operationally profitable, making it India’s first.

“Our auto segment delivered its first positive Ebitda margin at 0.3%,” Aggarwal wrote in his shareholder letter, dated 6 November, when the company declared its earnings. Ebitda, a measure of operational profitability of a business, refers to earnings before interest, tax, depreciation and amortization.