IPO Structure and Details of Ather Energy Limited
- Issue Size: ₹2,980.76 crore
- Fresh Issue: 8.18 crore equity shares aggregating to ₹2,626.30 crore.
- Offer for Sale (OFS): 1.11 crore equity shares aggregating to ₹354.76 crore by promoters and existing shareholders.
- Price Band: ₹304 to ₹321 per share, with a face value of ₹1.
- Lot Size: Minimum 46 shares (₹13,984 to ₹14,766 for retail investors). Small non-institutional investors (sNII) require 14 lots (644 shares, ₹206,724), and big non-institutional investors (bNII) need 68 lots (3,128 shares, ₹1,004,088).
- Subscription Dates: April 28, 2025, to April 30, 2025.
- Allotment Date: Expected on May 2, 2025.
- Listing Date: Tentative listing on BSE and NSE on May 6, 2025.
- Employee Reservation: Up to 100,000 shares with a ₹30 discount on the issue price.
- Allocation:
- Qualified Institutional Buyers (QIB): 75%
- Non-Institutional Investors (NII): 15%
- Retail Individual Investors (RII): 10%
- Anchor Investors: 44.95% (₹1,340 crore raised from 36 anchor investors, including PIMCO and domestic mutual funds).
- Book Running Lead Managers: Axis Capital, HSBC Securities, JM Financial, and Nomura Financial Advisory.
- Registrar: MUFG Intime India Private Limited.
- Grey Market Premium (GMP): As of April 28, 2025, the GMP is ₹0, indicating no premium over the upper price band of ₹321, suggesting neutral listing expectations with no immediate gains.
Company Overview of Ather Energy Limited
Founded in 2013 by IIT Madras alumni Tarun Mehta and Swapnil Jain, Ather Energy is a pioneer in India’s premium E2W market. The company designs, develops, and manufactures electric scooters, battery packs, charging infrastructure (Ather Grid), and proprietary software (Atherstack). Its flagship products include the Ather 450 series and Ather Rizta, known for advanced features like touchscreen dashboards, over-the-air updates, and cloud integration.
- Market Position: Ather is the fourth-largest E2W player in India by volume, behind Ola Electric, TVS Motor, and Bajaj Auto, with 109,577 units sold in FY24. It holds approximately 15% market share in the premium E2W segment.
- Infrastructure: Operates 265 experience centres and 233 service centres in India, with a presence in Nepal and Sri Lanka. Ather Grid has over 2,000 charging points across 200+ cities.
- Backing: Supported by Hero MotoCorp (37.2% stake), Caladium Investment, NIIF, and Flipkart co-founders Sachin and Binny Bansal. Hero MotoCorp’s strategic guidance enhances operational stability.
- Manufacturing: Current capacity of 420,000 E2Ws and 379,800 battery packs annually at its Hosur, Tamil Nadu facility. Plans to establish a new factory in Maharashtra (Factory 3.0) with a capacity of 500,000 E2Ws by 2027.
Objectives of the IPO of Ather Energy Limited
The proceeds from the fresh issue (₹2,626 crore) will be allocated as follows:
- ₹927.2 crore: Establishment of a new E2W manufacturing facility in Chhatrapati Sambhajinagar, Maharashtra, to boost production capacity to 1 million units by mid-FY26.
- ₹378.2 crore: Repayment or prepayment of borrowings (total debt: ₹1,121 crore as of December 2024).
- ₹750 crore: Investment in research and development (R&D) over five years to enhance product innovation.
- ₹300 crore: Marketing and branding initiatives over three years to strengthen market presence.
- Remaining Funds: General corporate purposes, including working capital and operational flexibility.
The OFS allows promoters (Tarun Mehta and Swapnil Jain, each offloading up to 9.8 lakh shares) and investors (e.g., Tiger Global, IIT Madras Incubation Cell) to partially exit, providing liquidity.
Financial Performance of Ather Energy Limited
Ather Energy’s financials reflect a high-growth, loss-making business typical of the EV sector, with improving margins but persistent challenges.
- Revenue:
- FY24: ₹1,789.1 crore (down 0.7% from ₹1,801.8 crore in FY23).
- 9M FY25 (ended December 31, 2024): ₹1,578.9 crore (up 28.3% from ₹1,230.4 crore in 9M FY24).
- Net Loss:
- FY24: ₹1,059.7 crore (up 22.6% from ₹864.5 crore in FY23).
- 9M FY25: ₹577.9 crore (down 25.6% from ₹776.4 crore in 9M FY24, indicating narrowing losses).
- Gross Margins: Improved from 9% in December 2023 to 19% in December 2024, driven by cost engineering, the launch of Ather Rizta, and software sales.
- Cash Flow: Operating cash outflow of ₹717 crore in 9M FY25, up from ₹268 crore in FY24, reflecting high capex and scaling costs.
- Debt: ₹1,121 crore as of December 2024, with ₹500 crore targeted for repayment via IPO proceeds.
- Key Ratios (based on RHP):
- Negative Price-to-Earnings (P/E) ratio due to losses.
- Return on Net Worth (RoNW) and Earnings Per Share (EPS) are negative.
- Net Asset Value (NAV) details not fully disclosed but indicate a capital-intensive business.
Analysis: Ather’s revenue growth is modest, with a slight decline in FY24 due to subsidy cuts under FAME II and market competition. However, the 28.3% revenue increase in 9M FY25 and doubling of gross margins signal operational improvements. Losses remain a concern, but the narrowing loss in 9M FY25 suggests progress toward profitability as scale improves. High cash burn reflects investments in capacity, R&D, and marketing, common in the EV industry (e.g., Tesla’s early years).
Strengths of Ather Energy Limited
- Premium Brand Positioning: Ather’s focus on high-tech, performance-driven scooters (Ather 450X, Rizta) with features like Atherstack software and cloud integration differentiates it from mass-market competitors.
- Vertically Integrated Model: In-house design and assembly of scooters, battery packs, and charging infrastructure ensure quality control and innovation.
- Ather Grid: Over 2,000 charging points across 200+ cities address range anxiety, a key barrier to EV adoption.
- Strong R&D: Over 300 patents, trademarks, and designs, with ₹750 crore allocated for future innovation.
- Government Support: Benefits from FAME II subsidies, PLI schemes, and state-level EV policies, despite subsidy volatility.
- Strategic Backing: Hero MotoCorp’s 37.2% stake provides financial stability and industry expertise. Global investors like Caladium and NIIF enhance credibility.
- Market Tailwinds: E2W sales are projected to grow at a 41% CAGR from FY24 to FY31, with penetration reaching 35% by FY31, driven by urbanization and sustainability trends.
- Anchor Investor Confidence: ₹1,340 crore raised from 36 anchor investors, including 49.6% from domestic mutual funds, signals strong institutional support.
Risks associated with Ather Energy Limited
- Persistent Losses: Ather’s net loss widened to ₹1,059.7 crore in FY24, and while losses narrowed in 9M FY25, profitability remains uncertain.
- High Debt: Borrowings of ₹1,121 crore as of December 2024, with only ₹378.2 crore targeted for repayment, pose financial strain.
- Low Capacity Utilization: Current manufacturing facilities operate below optimal levels, and adding capacity amidst this raises concerns about efficiency.
- Competition: Faces intense competition from Ola Electric, TVS Motor, Bajaj Auto, and low-cost EV brands, which could erode market share.
- Regulatory Risks: Changes in FAME II subsidies and EV policies could impact pricing and demand.
- Supply Chain Vulnerabilities: Dependence on global suppliers for critical components like batteries exposes Ather to disruptions and cost volatility.
- Limited Product Diversification: Relies heavily on Ather 450X sales, with only two core products (450 series and Rizta).
- High Marketing Costs: Significant spending on customer acquisition and branding impacts margins.
- Neutral GMP: A GMP of ₹0 suggests cautious investor sentiment and limited listing gains, increasing short-term risk.
Market and Industry Context
India’s E2W market is growing rapidly, driven by rising fuel prices, environmental awareness, and government incentives. Key trends include:
- Market Growth: E2W sales grew at a 101% CAGR over the past six years, with a projected 41% CAGR to 10.2 million units by 2031.
- Charging Infrastructure: Public E2W chargers are expected to grow at a 35-38% CAGR from FY24 to FY31, supporting adoption.
- Policy Support: FAME II, PLI schemes, and state subsidies incentivize EV manufacturing and adoption, though subsidy cuts pose risks.
- Competition: Ola Electric’s IPO success (₹6,145 crore raised in 2024) highlights investor appetite for EV stories, but its 50.92% post-IPO gain contrasts with Ather’s neutral GMP, suggesting tempered expectations.
Ather’s premium positioning and technology focus differentiate it from volume-driven competitors like Ola Electric, but its smaller scale and higher pricing may limit mass-market penetration.
Valuation of Ather Energy Limited
- Post-Money Valuation: ₹11,956 crore ($1.4 billion) at the upper price band of ₹321, a 44% reduction from earlier targets of $1.5–2 billion.
- Price-to-Sales (P/S) Ratio: Based on FY24 revenue of ₹1,789.1 crore and a market cap of ₹11,956 crore, the P/S ratio is approximately 6.7x, high for a loss-making company but typical for high-growth EV firms.
- Comparison: Ola Electric’s P/S ratio post-IPO was higher (around 8–10x), reflecting its larger scale and market leadership. Ather’s lower valuation may reflect its loss-making status and smaller market share.
Analysis: The reduced valuation aligns with market caution after a volatile 2024 for IPOs. While the 6.7x P/S ratio is elevated, it reflects investor optimism about EV growth. However, the negative P/E and lack of profitability make traditional valuation metrics less relevant.
Investment Considerations
Pros:
- Exposure to India’s fast-growing E2W market with strong long-term potential.
- Ather’s premium brand, proprietary technology, and Ather Grid provide a competitive edge.
- Strategic backing from Hero MotoCorp and institutional investor confidence (anchor round).
- Improving margins and narrowing losses signal operational progress.
- IPO proceeds will fund capacity expansion and R&D, critical for future growth.
Cons:
- Persistent losses and high cash burn raise concerns about financial sustainability.
- Neutral GMP suggests no immediate listing gains, increasing short-term risk.
- Intense competition and regulatory uncertainties could impact growth.
- High debt and low capacity utilization pose operational challenges.
- Limited product diversification increases reliance on a few models.
Brokerage Views:
- Bajaj Broking: Recommends moderate subscription for high-risk investors with a long-term horizon, citing losses and debt concerns.
- Ventura Securities: Optimistic, recommending subscription for potential listing gains, highlighting Ather’s premium positioning and upcoming factory.
- General Sentiment: Analysts are cautious due to losses but see long-term potential in Ather’s technology and market positioning.
Recommendation
Ather Energy’s IPO offers a compelling opportunity to invest in India’s EV revolution, particularly for those bullish on the E2W sector’s 41% CAGR growth through 2031. The company’s premium positioning, proprietary technology, and expanding Ather Grid network position it as a strong long-term contender, despite current losses. However, persistent financial losses, high debt, and a neutral GMP warrant caution for short-term investors seeking listing gains.
- Long-Term Investors: Consider subscribing if you have a high-risk appetite and a 5–10-year horizon. Ather’s focus on R&D, capacity expansion, and government-backed EV tailwinds could drive significant value as it scales and approaches profitability. The involvement of Hero MotoCorp and institutional investors adds credibility.
- Short-Term Investors: Avoid or approach cautiously due to the ₹0 GMP and oversubscription risks, which may limit listing gains. The high P/S ratio and lack of profitability increase near-term volatility.
- Risk-Averse Investors: Skip the IPO, as the loss-making nature, debt burden, and competitive pressures make it unsuitable for conservative portfolios.
Action: To maximize allotment chances in case of oversubscription, retail investors should bid at the cut-off price (₹321, ₹14,766 for one lot). Monitor subscription status and GMP trends closer to the listing date for updated sentiment. Always consult a financial advisor before investing, as IPOs carry market risks.
Critical Perspective
While Ather’s technology and market positioning are strong, the establishment narrative around EV IPOs (e.g., Ola Electric’s success) may overstate near-term potential. Losses and cash burn are not uncommon in disruptive industries, but Ather’s high debt and reliance on a few products raise red flags. Investors should critically assess whether Ather can differentiate itself in a crowded market and achieve profitability before committing capital. The neutral GMP and cautious brokerage views suggest the market is skeptical of immediate upside, tempering the hype around EV stocks.