Ather’s IPO: A green revolution or a risky ride?

What Ather’s IPO tells us about the electric two-wheeler industry in India and what the future holds for the company.

The News

Ather Energy, an electric two-wheeler start-up, recently received approval from the SEBI to raise money via an IPO. It had filed its Draft Red Herring Prospectus (DRHP) with SEBI in September 2024.

In DRHP, alongside the financial details and the IPO’s objectives, the company also has to provide a comprehensive overview of the industry it operates in.

So, let’s decode Ather’s DRHP and understand what’s driving the demand for electric two-wheelers in India, understanding key trends and important information about the sector.

The Demographic shifts

The demand for electric two-wheelers isn’t just about a shift in technology or environmental concerns—it’s also linked to India’s evolving demographics and income distribution.

India’s young, working-age population and the rapid rise of the middle and affluent classes are creating fertile ground for industries like EVs to thrive.

Looking ahead to 2030-31, the number of people in the lowest income bracket (earning under ₹1.25 lakh) will shrink drastically, from 19.6 crores to 7.9 crores. Contrarily, the middle class is expected to expand from 43.2 crore to 71.5 crore, and the rich class from 5.6 crore to 16.9 crore.

Interestingly, 70% of middle-class households and 75% of rich households already own two-wheelers. So, as income levels increase, people are likely to own two-wheeler vehicles.

Now let’s look at the non-demographic factors driving the demand for electric two-wheelers (E2W).

Non-demographic factors

1. Government Incentives and Policies:
   Major states, such as Maharashtra and Delhi, provide additional subsidies and exemptions on road tax and registration fees for E2Ws, making them more affordable​. The FAME II scheme offers subsidies of up to ₹15,000 per kWh, with a maximum cap of 15% (earlier 40%) of the vehicle cost for electric two-wheelers.
2. Reduced Total Cost of Ownership (TCO):
   E2Ws have a running cost of around ₹0.2 – ₹0.25 per km, compared to ₹2 – ₹2.5 per km for Internal Combustion Engine (ICE) vehicles​. While battery costs, a significant portion of the E2W price, have decreased by over 85% in the last decade, rising fuel costs are also pushing consumers towards an E2W.
3. Technological Advancements & Improved Infrastructure:
   Innovations such as touchscreen dashboards, smartphone integration, and over-the-air updates attract customers, over 7000 public EV chargers (as of FY24) make them viable alternatives to ICE vehicles.

That being said, let’s divert our attention towards the Ather itself, understanding its position in the E2W segment.

Ather vs. Other Players
Ather Energy held an 11.5% market share in the Indian electric two-wheeler (E2W) segment during FY24, making it the third-largest E2W manufacturer in India by sales volume, after Ola (with 35.1% share) and TVS (with 20.1% share).

If we look at the latest data, while Bajaj Auto dethroned Ola, gaining the highest market share of over 25%, Ather fell to the fourth position with a 14.5% market share in December 2024.

Revenue and Profits
As per the DRHP, Revenue from operations for FY24 was ₹17,54 crore, a slight decrease from ₹1781 crore in FY23 because of the reduction in FAME subsidies. However, it marks a significant growth from ₹409 crore in FY22.

The revenues are growing, but the company is still running in losses. For FY24, losses were ₹1069 crore, an increase from ₹865 crore in FY23 and ₹344 crore in FY22​.

EBITDA margin improved over time, from -62% in FY22 to -36% in FY24, showcasing progress despite negative profitability.

Objective of the IPO

As mentioned in their DRHP, the company is raising money to fund expansion, R&D, strengthening charging infrastructure, and also to reduce debt. As of FY24, Ather carries a substantial debt of ₹478 crore in total.

To Conclude
Ather’s IPO shows the growing demand for electric two-wheelers in India, supported by rising incomes and government incentives. While Ather is growing, it’s still making losses and has high debt.

For investors, this IPO would also be about trusting the future of electric vehicles and Ather’s ability to turn things around.