Ola Electric Founder Again Pledges Shares to Fund AI Venture

Bhavish Aggarwal, the founder of Ola Electric, has once again pledged a substantial number of his shares in the electric vehicle company. The move is intended to secure debt for his artificial intelligence venture, Krutrim Data Centre, and to enable his participation in Ola Electric's upcoming rights issue.

Aggarwal pledged 20 million Ola Electric shares, representing 4.32% of the company, on September 30. These shares are held as collateral for non-convertible debentures issued by Krutrim Data Centre, an AI infrastructure and services company. This follows a previous instance where Aggarwal sold a portion of his stake to repay a loan used to release previously pledged shares.

Ola Electric stated that the current pledge is solely to fund Aggarwal's subscription to the company's ₹1,000 crore rights issue, emphasizing that no shares are being sold and that he will invest on the same terms as other shareholders. This strategy allows Aggarwal to maintain his control over Ola Electric without diluting his stake, as selling shares to fund the rights issue would be counterproductive to this goal.

However, the repeated pledging has drawn criticism. Shriram Subramanian, founder of advisory firm InGovern Research, noted that investors may view this cycle of pledging, clearing, and re-pledging as a sign of financial stress for the promoter. Ola Electric has faced financial headwinds, reporting a 45% year-on-year revenue decline and negative free cash flow in its most recent reported quarter.

Concerns remain regarding the potential downside if Krutrim Data Centre defaults on its debt obligations. In such a scenario, the pledged Ola Electric shares could be sold by lenders, potentially impacting the company's stock price. While considered an extreme outcome, the risk itself introduces an overhang for public investors monitoring the situation.