Ola Electric fells to a day low of Rs 38.85 on Monday after its auditor flagged a penalty provision reversal in the June quarter results.

What spooked investors was a note buried in the auditor’s report. Ola Electric had reversed a Rs 57 crore penalty provision during the quarter, and that reversal made the company’s net loss look smaller than it otherwise would have on a year-on-year basis.

Here’s the story. Ola Electric was picked for a government PLI scheme four years ago, which required it to invest Rs 225 crore per GWh of manufacturing capacity within two years.

The company later asked for more time, and a penalty provision was set aside back in the March quarter to cover that risk.

This time around, Ola Electric reversed that entire provision, saying it had requested the Ministry of Heavy Industries for an extension and a waiver of the related penalty.

The problem is that approval from the ministry hadn’t come through as of 30 June. Without that sign-off, the auditor said it couldn’t confirm whether reversing the provision was the right call.

Away from the accounting note, the quarter itself had a mixed script. Ola Electric’s net loss narrowed to Rs 336 crore from Rs 428 crore a year earlier, but revenue fell 45% year-on-year to Rs 455 crore.

On the brighter side, vehicle registrations jumped 97% quarter-on-quarter, well ahead of the broader electric two-wheeler market’s 17% growth, pushing the company’s market share up to 8.4% from 5.1% in the previous quarter.

Orders nearly doubled to about 44,000 units, and deliveries rose to roughly 39,200 units.

Looking ahead, Ola Electric plans to name its first set of dealers under a new dealer-based distribution model on 4 September.

As of 10:19 am, the stock was trading at Rs 40.66 on the NSE, down 1% for the day.

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