How Ola Electric's 12% unallocated costs helped it show an Ebitda profit in its auto business

Subscribe to enjoy similar stories. New Delhi/Bengaluru: Ola Electric Mobility Ltd’s accounting approach to club about 12% of total costs as unallocated expenses in the July-September quarter — about twice the year-ago level — helped it report operational profitability in its scooter and bike business. Unallocated expenses were a fourth of the company’s net loss in the September quarter, up from a fifth in the year-ago period.

Such expenses are a valid accounting practice, to be sure, and get reflected in a company's consolidated accounts. In Ola Electric’s case, unallocated expenses refer to spending that the management says could not be allocated to either of its businesses — two-wheelers and cells (electric vehicle batteries). In the second quarter, this amounted to ₹106 crore, against total expenses of ₹893 crore.

That compares to ₹99 crore — or about 6% of ₹1,593 crore — assigned to unallocated expenses in Q2 of FY25. Ola Electric's unallocated expenses, absent from its peers’ books, failed to impress investors. 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 its 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.