Ather Energy

IPO Size: Rs. 2,981 cr

• Rs. 2,626 cr is Fresh Issue, for (i) Rs. 927 cr greenfield capex (ii) Rs. 750 cr R&D (iii) Rs. 300 cr marketing (iv) Rs. 40 cr debt repayment, of Rs. 534 cr gross debt
• Rs. 355 cr is Offer for Sale (OFS): Half by investor GIC (reducing 15% stake to 11% after 2.5 years of investment), 24% of OFS by NIIF (14% to drop to 11%), 18% OFS by 2 founder promoters (6.8% each to drop to 5.1%) post IPO.

Price band: Rs. 304-321 per share

M cap: Rs. 12,297 cr, implying 24% dilution

IPO Date: Mon 28^th Apr to Wed 30^th Apr 2025, Listing Tue 6^th May 2025

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

 

Electric Scooter OEM

Ather Energy is a 11 year old IIT-Madras incubated pure-play electric scooter manufacturer, with an installed capacity of 4.2 lakh units per annum, at Hosur, Tamil Nadu. It sells 7 scooter variants in 2 models (450 and Rizta, latter launched in May 2024), through 280 outlets. Nearly 60% sales come from South India.

 

Competitive Market

Ather’s market share in India’s electric two-wheeler (e2W) sales has remained stagnant at ~11.4% (FY25) even as legacy peers Bajaj (Chetak) and TVS (iQube) have aggressively captured 20%+ market share, in the past just 2 years.

Ather’s distribution reach of 280 outlets is also much smaller than incumbents – Bajaj 3,250 and TVS 900. Even Ola has 4,000 outlets and Greaves’ Ampere 420 dealers.

Competitive intensity remains strong, as industry fast adopts the clean fuel, with ‘electric’ no longer being a differentiator, but an accepted-norm.

 

Industry Outlook

Another fear looming on e2W industry, in the near term, is halving of subsidy under PM E-Drive scheme from 1.4.25 (demand incentive down to Rs. 2,500 per kWh and subsidy capped at INR 5,000 per vehicle), which may put pressure on company’s financial performance going forward. Ather lacks deep pockets which some peers like Bajaj enjoy (Rs. 23,000 cr surplus cash). Anyways, this subsidy scheme ends on 31.3.26, post which, e2W demand growth remains to be monitored.  

 

Loss Making Startup

Ather Energy is heavily loss making, reporting EBITDA loss of Rs. 370 cr and a net loss of Rs. 578 cr in 9MFY25, on sale of 1.08 lakh 2Ws and revenue of Rs. 1,579 cr. Operating leverage will kick-in only gradually, as investment in technology and distribution will be essential to scale up volumes.

Till date, Ather has raised nearly Rs. 3,900 cr, of which, Rs. 2,500 cr has funded loss of past 5 years. While quantum of loss is reducing, a green bottomline (net profit) is unlikely in FY26E and looks difficult for FY27E as well.

 

Inappropriate Allocation for Objects

Ather’s plant is only 40% utilised, yet a huge capex of Rs. 927 cr is planned for 5 lakh units incremental capacity at a greenfield plant at Chhatrapati Sambhajinagar, Maharashtra, scheduled to be operational by Mar 2027. Ather has been unable to ramp up utilisation beyond 40% in past 4 fiscals, making this capex look ambitious and a little ahead-of-time.

Annual R&D spend is Rs. 250 cr, but Rs. 750 cr is allocated for R&D and annual marketing spend is Rs. 120 cr, with Rs. 300 cr earmarked for marketing from fresh issue proceeds.

On the other hand, of Rs. 534 cr gross debt, Rs. 380 cr is very high-cost (14.5% pa interest), resulting in Rs. 75 cr annual interest outgo. Yet, only Rs. 40 cr debt is proposed to be repaid from IPO proceeds. We fail to understand this allocation of IPO funds, wherein immediate needs are overlooked for long term optimisation. One wonders, if interest expense is ignored simply because it falls below EBITDA? 

 

Aggressive Pricing

At an enterprise value of Rs. 12,300 cr, Ather Energy’s revenue multiple is at 5.6x, on FY25E basis. This is quite a stretch via-a-vis Bajaj’s 4.1x, TVS’ 3.5x and Hero Moto’s 1.5x, all of which are profitable (14-20% operating margin) and well-capitalised.

Ather’s IPO pricing discounts atleast 2 years forward performance, which makes it difficult for shareholders to potentially make money.

 

Post-listing Selling Overhang

Shareholding pattern must not influence to invest in the IPO. NIIF is part-selling in the IPO, although it invested Rs. 600 cr just last year in Sep 2024. Zerodha brothers own 4.6% stake in Ather, with cost below Rs. 220 per share, acquired from Sachin Bansal in June 2024, and sitting on 46% MTM gains in less than a year.

Promoter stake (2 founders & Hero Moto) will contract to about 40% post IPO, with some promoter holding pledged with 360 One for loan against security. Post listing, selling overhang will remain, as GIC, NIIF and Tiger Global together own 26% post-IPO stake.