Ather Energy files DHRP with SEBI for IPO launch

• Promoters and shareholders to offload stakes but not Hero MotoCorp, largest external shareholder.
• Co-founders Tarun Sanjay Mehta and Swapnil Babanlal Jain to offer 10 lakh shares.

Electric two-wheeler manufacturer Ather Energy has submitted its draft red herring prospectus (DRHP) to the Securities Exchange Board of India (SEBI) as it seeks to launch an initial public offering (IPO).

This positions Ather Energy as the second electric two-wheeler manufacturer to debut on the stock exchange, following the successful public offering of Ola Electric last month.

Ather’s strategic move to raise funds—up to Rs3,100 crore (approximately $370 million)—through a fresh issue of equity shares and an offer for sale (OFS) of up to 2.2 crore shares manifests the increasing investor interest in the burgeoning electric vehicle (EV) market in India.

Financial landscape

The DRHP reveals that notable stakeholders will partake in the OFS, with GIC Ventures, through its subsidiary Caladium Investment, divesting 47.8 per cent of the total offer.

Other investors, including Tiger Global and 3 States Ventures, will also contribute to the OFS with offloading percentages of 18.1 per cent and 2.18 per cent, respectively.

Hero MotoCorp is the largest external shareholder with 37.2 per cent followed by GIC (Caladium Investment) and NIIF which hold 15.04 per cent and 10.29 per cent respectively.

However, Hero MotoCorp won’t participate in the OFS.

Furthermore, co-founders Tarun Mehta and Swapnil Jain will individually offer 10 lakh shares, underscoring the leadership’s confidence in the firm and its growth trajectory.

The fresh issue and the OFS will be priced at a face value of Rs1, while the final price band will be determined in consultation with appointed book-running lead managers, including Axis Capital, HSBC Securities, Nomura Financial, and JM Financial.

Ather Energy’s financial landscape is noteworthy, particularly its recent ascent to unicorn status following a robust  $71 million investment from the National Investment and Infrastructure Fund (NIIF).

Pivotal moment

With total funding exceeding $500 million, Ather has demonstrated a substantial capacity to attract investment, essential for its expansion and innovation in the competitive electric two-wheeler market.

The firm’s plan to utilise proceeds from the IPO for capital expenditure, debt repayment, research and development, and marketing expenditures further illustrates its commitment to scaling operations and enhancing product offerings.

However, the current financial health of Ather reveals a mixed bag of results. The recent disclosure of revenue for first quarter of  FY25 indicates Rs339 crore, accompanied by a net loss of Rs183 crore, reflecting the challenges that come with rapid growth and market expansion.

In FY24, while the revenue showed a modest decline at Rs1,754 crore, Ather’s customer base experienced a commendable growth of 34 per cent, reaching 114,000 customers, building on a 270 per cent increase in the previous fiscal year.

The firm’s reliance on raw material imports from China, which surged to 28 per cent in FY24 from 10 per cent in FY23, raises pertinent questions regarding supply chain stability in an increasingly geopolitically sensitive environment.

In comparison to its main competitor, Ola Electric, which reported Rs1,644 crore in revenue for Q1 FY25 along with a reduced net loss of 17 per cent, Ather Energy holds a 9 per cent market share within the rapidly evolving two-wheeler EV segment.

The competitive landscape is characterised by rapid escalations in market share and innovations, with Ola currently commanding a 49 per cent market share.

The upcoming IPO of Ather Energy, reminiscent of Ola Electric’s successful Rs6,145 crore IPO, signifies a pivotal moment for the electric two-wheeler industry in India, underscoring the transformation towards sustainable mobility.