Introduction
Ather Energy, a prominent player in India’s electric two-wheeler market, has initiated its Initial Public Offering (IPO) with high expectations. However, as of Day 2 of the bidding process, the subscription figures have been underwhelming, with only 23% of the issue subscribed. Additionally, the Grey Market Premium (GMP) has dipped to ₹1, indicating tepid investor interest. This article delves into the details of Ather Energy’s IPO, its financial performance, market position, and the factors influencing investor sentiment.
IPO Overview
- IPO Size: Approximately ₹4,500 crore, comprising a fresh issue of ₹3,100 crore and an Offer for Sale (OFS) of up to 2.2 crore equity shares by existing shareholders.
- Price Band: ₹304 to ₹321 per share.
- IPO Dates: Public bidding opened on April 28, 2025, and will close on April 30, 2025.
- Anchor Investors: Participated on April 25, 2025.
- Lead Managers: Axis Capital, HSBC Securities, JM Financial, and Nomura Financial Advisory.
Day 2 Subscription Status
As of the end of Day 2, the IPO has garnered a subscription of only 23%, reflecting a cautious approach from investors. The breakdown is as follows:
- Qualified Institutional Buyers (QIBs): Minimal participation observed.
- Non-Institutional Investors (NIIs): Subdued interest.
- Retail Individual Investors (RIIs): Limited engagement.
The low subscription rates across categories suggest that investors are adopting a wait-and-watch strategy, possibly due to concerns over the company’s financials and market dynamics.
Grey Market Premium (GMP) Trends
The GMP for Ather Energy’s IPO has seen a significant decline, currently standing at ₹1. This sharp drop from earlier premiums indicates a lack of enthusiasm in the unofficial market, often considered a barometer for listing day performance.
Financial Performance
Ather Energy’s financials present a mixed picture:
- Revenue: ₹1,753 crore in FY24, a slight decline from ₹1,780 crore in FY23.
- Net Loss: Widened to ₹1,059 crore in FY24 from ₹865 crore in FY23.
- Customer Base: Expanded to 114,000 as of March 31, 2024, up from 85,000 in the previous year.
The increasing losses, despite a growing customer base, raise questions about the company’s path to profitability.
Market Position and Competition
Ather Energy holds a 12% share in India’s electric two-wheeler market, trailing behind competitors like Ola Electric (40%) and TVS Motors (30%). The intense competition, coupled with price-sensitive consumers, poses challenges for Ather’s premium offerings.
Use of IPO Proceeds
The company plans to utilize the funds raised for:
- Manufacturing Expansion: ₹927.2 crore allocated for establishing a new electric two-wheeler factory in Maharashtra.
- Research and Development: ₹750 crore over five years to enhance product offerings and technological capabilities.
- Debt Repayment: ₹378.2 crore earmarked for repaying existing borrowings.
- Marketing Initiatives: ₹300 crore to bolster brand visibility and customer acquisition.
- General Corporate Purposes: Remaining funds to support overall business operations.
Investor Sentiment and Outlook
The lukewarm response to Ather Energy’s IPO can be attributed to several factors:
- Financial Concerns: Persistent losses and flat revenue growth raise red flags for potential investors.
- Market Competition: Dominance of established players like Ola Electric and TVS Motors intensifies the competitive landscape.
- Valuation Adjustments: The company’s decision to slash its valuation by 44% ahead of the IPO may have signaled underlying challenges.
However, Ather’s focus on innovation, expansion plans, and backing from major investors like Hero MotoCorp could provide long-term growth opportunities.
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