– Olectra Greentech – Electric Bus Opportunity

AmitGoyal:

Hi everyone, I must admit that I have been spectacularly wrong on Olectra Greentech. But my logical mind cannot understand these fundamental issues:-

How can a company which just made 500-600 buses in the previous year, start making more than 2,500 buses (5X) from this year as they have to provide 5,150 buses to Maharashtra State Road Transport Corporation (MSRTC) in 24 months.

This is just a Letter of Intent and not a Definitive Agreement. There is a huge difference between these two things. Also how can some company be awarded a Rs 10,000 crore order without any competitive bidding or tender. I didn’t find any big company losing this contract or Olectra being declared L1 in competition. This order might face some legal issues in near future.

Also if you see carefully the State undertaking will pay them over 12 years. Now whatever financial engineering is or is not being done by the company Olectra or its subsidiary Evey (I hope it’s a subsidiary and I might be wrong). The fact is that 10,000 crores will actually accrue to the company over 12 years which is around just 833 crores per year.

I have definitely missed this opportunity partially as I have exited the company in 2021 with a very handsome multibagger profit but far short of what I could have actually made. Good luck to all those investors who have made money in this company. But with a market cap of Rs 10,000 crore already as on 7 July 2023 and a PE of around 150, I think we should be a little careful in this stock. At a correct price (I think not possible now as it will have to correct by atleast a huge 60 to 70 percent), I might be tempted to buy this stock once again.

Thanks and Regards,

Amit Goyal.

I will try to answer few things as per my understanding about the company.

They have started construction activities of a new facility with a capacity of 5000 buses/ years on single shift basis, this will be ready in this month. This facility can help them to clear the backlogs.

Regarding 12 years contracts, they are selling buses to the operator not ST’s, operator will clear the due amounts to olectra (As per some concall discussions ) as per the payment cycle. This 12years staggered payment may not be applicable to olectra.

Now in 1 more tender (BEST) they are L1 (told by management in previous call) and price negotiations are underway. Order book will be 11000 buses now.

Order book can grow from here onwards due to PM e-Sewa EV bus tenders, 3600 buses tender is already floated and about to close in the Jan’24.

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Olectra Greentech – Electric Bus Opportunity

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