One of the top producers of electric scooters in India, Ather Energy, is preparing for its eagerly awaited initial public offering (IPO). But instead of aiming for $2 billion, the Hero MotoCorp-backed EV manufacturer now intends to go public at a valuation of about $1.2 billion. It is anticipated that the IPO will raise approximately ₹3,487 crore ($400 million) by the end of March or the beginning of April. Here is all the information you require regarding Ather Energy’s plans for an initial public offering (IPO), the reasoning behind the valuation reduction, and the implications for investors.
Credits: Motilal Oswal
Ather Energy’s IPO Structure: What’s on Offer?
Both primary and secondary share sales will be part of the next initial public offering (IPO). Along with current investors like Tiger Global Management’s Internet Fund III and the National Investment and Infrastructure Fund Ltd. (NIIF), the company’s founders Tarun Mehta and Swapnil Jain will be selling off a portion of their holdings. Ather’s biggest stakeholder, Hero MotoCorp, which owns 37% of the company, will not be taking part in the share sale, though.
More than 1.73 crore outstanding compulsory convertible preference shares (CCPS) were recently converted into 24.04 crore fully paid-up equity shares by Ather Energy in anticipation of the IPO. This action guarantees a more seamless transition to a publicly traded business and simplifies the company’s shareholder structure.
Why the Valuation Cut?
Ather initially targeted a $2 billion valuation for its IPO, but it has now reduced this to around $1.2 billion. Several factors may have contributed to this decision:
Market Conditions: The overall market sentiment for tech and EV IPOs has been cautious, with investors focusing on profitability and sustainable growth.
Competitive Landscape: Ather operates in a highly competitive sector with players like Ola Electric, Bajaj Auto, and TVS Motors ramping up their EV offerings. Investors may be looking at Ather’s financials more critically in comparison.
Financial Performance: While Ather Energy has shown strong growth, EV businesses often require heavy investments in manufacturing, supply chains, and R&D, impacting profitability.
By opting for a lower valuation, Ather Energy aims to attract a broader pool of investors and ensure a successful listing with healthy post-IPO performance.
Comparison with Ola Electric’s IPO
Ather Energy’s IPO will be the second major public listing by an Indian pure-play electric vehicle company, following Ola Electric’s debut last year. While both companies operate in the EV space, their approaches and market positioning differ:
Ola Electric: Focused on mass-market EV adoption with aggressive pricing and expansion into international markets.
Ather Energy: Positioned as a premium EV brand, emphasizing quality, technology, and performance.
Ola Electric had a mixed stock market debut, with its shares experiencing volatility post-listing. Ather Energy will likely be closely watched to see if it can navigate the challenges and maintain investor confidence.
What This Means for Investors
For potential investors, Ather’s IPO presents both opportunities and risks:
Opportunities:
Growing EV Market: India’s EV sector is expected to witness exponential growth, with strong government incentives and rising consumer adoption.
Strong Brand & Technology: Ather Energy has built a premium brand image and continues to invest in technology, battery innovation, and infrastructure.
Strategic Backing: With Hero MotoCorp as a key investor, Ather has strong industry backing that can support future growth.
Risks:
Profitability Concerns: EV companies require high capital investment, and Ather is still in its growth phase with profitability yet to be achieved.
Market Competition: With traditional automakers aggressively entering the EV space, Ather faces stiff competition.
Valuation Sensitivity: Even with a reduced valuation, investors will closely scrutinize Ather’s financials to determine if it justifies its market price.
Credits: Motilal Oswal
Conclusion: Should You Invest?
For investors wishing to get into India’s rapidly expanding EV market, Ather Energy’s IPO offers an intriguing option. By providing shares at a more affordable price, the value reduction may allay fears while simultaneously increasing the IPO’s appeal. Before deciding, prospective investors should carefully consider the company’s competitive positioning, long-term growth prospects, and fundamentals, just like they would with any other investment.
All eyes will be on Ather Energy as the IPO debut date draws near to observe how it handles this crucial juncture in its development. Will it pave the way for the next major EV success story in India? Investors will soon find out.
