Bhavish Aggarwal's 1% Share Pledging Plans: How It Can Help Ola Electric's Expansion?

Ola founder and promoter Bhavish Aggarwal has announced his share pledging plans on December 2. He has pledged 1.1 per cent of Ola Electric Mobility’s equity share capital to expand his artificial intelligence (AI) venture ‘Krutim’ by facilitating funds through debentures. As of September 30, Aggarwal had 30.02 per cent stake in the company’s total shares.

The company, in its exchange filing, said the promoter’s pledge creation is a part of non-disposal undertaking that was inked with the borrower. This contract prevent a shareholder from selling their shares in a company. Currently, Aggarwal’s shares are locked-in.

“The promoter has signed a non-disposal undertaking executed between the promoter, Axis Trustee Services Limited and Krutrim Data Centre Private Limited ("Borrower"), dated 23 November 2024 ("Non Disposal Undertaking") to provide comfort in relation to certain debentures being issued by the Borrower,” the statement read.

“Upon the expiry of the lock-in over the Promoter Shares, the Promoter will create a pledge over a portion of the Promoter Shares and make relevant disclosures in accordance with applicable law,” it added.

Under the non-disposal undertaking, Aggarwal has committed not to sell or transfer 48,353,967 equity shares of Ola, comprising 1.10 per cent of the equity share capital and accounting for 3.65 per cent of the promoter’s shares.

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What Is Share Pledging?

Share pledging means when a shareholder, usually promoter, uses his own shares as collateral to borrow money from financial institutions. The process allows them to raise funds without selling their shares. However, if the promoter fails to repay the loan, the lender can sell those shares which can even impact the company's share price.

Promoters often opt for share pledging when they need cash for business expansions, personal financial needs, or even to pay off other loans. So the promoter doesn't sell his shares, rather pledge them to raise funds to maintain ownership and control of the company.

Excessive share pledging can leave a negative impact on the control of promoters over the company. If a lender sells pledged shares, it could dilute the promoter's voting power in the company.

Investors often view high levels of share pledging as an indication of potential financial strain in the company.

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How Share Pledging Can help Ola?

The announcement came on a day when Ola revealed its store expansion plans in December. Currently, the company has 800 stores across the country. But the firm has planned to increase the store count by 4,000 in India by December 20, 2024.

In October, Ola Electric had planned to take the store count to 2,000 by March 2025. However, it issued a fresh statement on December 2, mentioning the company is "doubling down on the rollout plan" to accelerate the EV adoption.

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It's worth-mentioning that Ola's market share has been fluctuating in the past few months despite the company's dominance in EV market. As per Vahan registrations data, Ola's market share fell from a high of 52 per cent in April to 28.6 per cent in September. In October, it recovered to 31 per cent due to festive discounts but now again down at 25 per cent in November.