Ola Electric shares rebounded sharply on Friday, climbing 9.46% to reach Rs 56.55. This surge comes after the company clarified that its temporary sales backlog in February was due to ongoing negotiations with vendors handling vehicle registrations.

The Bhavish Aggarwal-led company also stated that it had received inquiries from various government bodies, including the Ministry of Road Transport and Highways (MORTH) and the Ministry of Heavy Industries, and that it is actively working on addressing them. Ola Electric assured investors that the backlog is being resolved quickly, with daily registrations now exceeding 50% of the average daily sales from the past three months. The company expects to clear all remaining issues by the end of March 2025.

Legal and financial concerns

Despite this positive momentum, Ola Electric is facing legal and financial challenges. The company recently disclosed that its creditor, Rosmerta Digital Services, has filed an insolvency petition with the National Company Law Tribunal (NCLT) in Bengaluru. The petition alleges a default in payment for services rendered, seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against Ola Electric Technologies Pvt Ltd.

Ola Electric has strongly disputed these claims and stated that it is seeking legal advice to challenge the allegations. This development adds to the uncertainty surrounding the stock.

Expert opinions: should you invest?

Market experts remain cautious about Ola Electric's stock. While some suggest that it could be a short-term trading opportunity, they do not recommend averaging down positions at current levels.

• Mitesh Panchal, SEBI-registered analyst, advises that investors should only consider the stock for a short-term bounce, with a stop-loss set at Rs 48. He does not expect the stock to rise beyond Rs 65-70 in the next three months.
• Gaurang Shah, Senior VP at Geojit Financial, highlights concerns over the company’s financial health, governance issues, and customer dissatisfaction. He suggests that investors looking for EV-related opportunities should focus on more established players instead.

While Ola Electric’s recent price surge may seem attractive for short-term traders, the stock remains highly volatile and carries significant risks. With a balance sheet showing losses exceeding Rs 1,500 crore, ongoing legal battles, and governance concerns, long-term investors might want to exercise caution.

If you are considering an entry, a well-defined exit strategy with a strict stop-loss is crucial. However, for those holding positions at higher levels, averaging down is not advised. Instead, partial exits at rebounds with a trailing stop-loss might be a better approach.

As always, investors should conduct their own research and consider consulting with financial experts before making any investment decisions.