IPO Note : Ather Energy Ltd By Geojit Financial Services Ltd
Ather Energy Ltd (AEL), incorporated in 2013, is a pioneer in the Indian electric two-wheeler (“E2W”) market. It is a pure-play EV company that sells E2Ws and the associated product ecosystem, comprised of software, charging infrastructure and smart accessories, all of which are conceptualised and designed by the company in India. Other than battery packs, which are manufactured in-house, and portable chargers and motors, which are designed and manufactured by suppliers, other key E2W components, such as motor controllers, transmissions, vehicle control units, dashboards, DC-DC converters, harnesses, and chassis, are designed in-house and outsourced to suppliers for manufacturing
* India’s E2W market is expected to grow at a CAGR of ~41% to 44% as E2W penetration is expected to increase to 35-40% by FY31 from 5.1% in FY24.
* AEL offers premium products that appeal to aspiring customers. The company is also working on a new platform called Zenith, which will support electric motor cycle segment in the 125cc to 300cc range.
* Ather has launched a new Halo smart helmet that offers features such as wireless charging as well as seamless connectivity, which helps to improve sales volume, and AEL is focusing on improving the ecosystem through implementing EV charging stations.
* The company has an annual installed capacity of 4.2 lakh E2W and 3.8 lakh battery packs at its Hosur facility in Tamil Nadu. To enhance its overall production capacity to 14.2 lakh units, Ather is building a dedicated E2W hub in Maharashtra.
* Ather operates an asset-light distribution model comprising experience centres and service centres operated by its third-party retail partners.
* AEL’s revenue grew at a CAGR of 107.1% between FY22 and FY24, reaching Rs 1,753.8 crore. Although the company reported a loss of Rs 1,059.7cr in FY24, it is well-positioned to improve profitability by leveraging advancements in EV technology.
* At the upper price band of Rs 321, Ather’s EV/Sales ratio of 7.1x (FY24) appears expensive. However, as a pioneer in the E2W segment, the company is in a strong growth phase with robust R&D and new technological platforms. Despite current profitability challenges and valuation concerns, we recommend a "Subscribe" rating for high-risk investors with a long-term outlook.
Purpose of IPO
The issue is primarily an Offer for Sale (OFS) of up to 1,10,51,746 equity shares totalling Rs 354.76 cr. and fresh issue of up to 8,18,06,853 equity share totalling Rs 2,626cr. The objective of the issue is to meet the capital expenditure incurred by the company for E2W factory (Rs 927cr), repayments of borrowings(Rs 40cr), investment in R&D (Rs 750cr), expenditure towards marketing initiatives (Rs 300cr) and general corporate purposes.
Key Risks
* AEL sources all EV components from suppliers for in-house assembly of E2W.
* It relies on imports from countries like China, which may be affected by regulatory or policy changes.
* Any disruption in the supply, pricing, or quality of lithium-ion cells could adversely impact operations
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