Ather Energy could launch IPO by FY25 end, earlier than initially planned

Launch of a family scooter and expansion of dealership network to help it increase market share

Ather Energy may go for an initial public offering (IPO) much earlier than originally planned, which was intended to occur only after achieving profitability or Ebitda-positive, according to merchant bankers who have had preliminary discussions with the company.

The bankers say Ather is looking at an IPO sometime at the end of next year. By then, the company expects to see a major increase in volumes on its market share and revenues, thanks to the launch of its electric family scooter and the planned expansion of its dealership network across the country. Ather Energy declined to comment on the issue.

In an interview with Business Standard in August, Ather co-founder Tarun Mehta had said the company would consider an IPO only after it shows net profits, which would take 24 months.

However, sources say that since Ather is in the investment and growth phase, and more money is required for expansion and research and development, becoming profitable will take more time. So the best time for an IPO would be when it is close to becoming Ebitda (earnings before interest, taxes, depreciation, and amortisation) positive.   

The company will also have the advantage of benchmarking itself against the Ola Electric IPO, which is expected to file its draft red herring prospectus (DRHP) this week and hopes to go to the market before the general elections next year. Based on its last fundraise of $150 million from Temasek Holdings, Ola is currently valued at $5.5 billion and seeks an IPO valuation of around $7 billion. It hopes to raise anything between $700-800 million through the IPO, according to bankers.

In September, Ather raised Rs900 crore through a rights issue from existing investors Hero Motorcorp (Rs550 crore) and Singapore-based sovereign fund GIC. Hero already had a 34.2 per cent stake in the company. Ather had earlier looked at a bigger fundraise that would take it beyond unicorn level, but the plan was shelved due to the funding winter across the globe.

The company is making a big push in volumes with the proposed launch early next year of its electric family scooter. The expectation is it should be able to go up to 40,000 scooters a month with this model, but only after it has also expanded its dealership network to over 400 by the end of next year.

In November, Ather had registrations of 10,000 scooters and has sold 0.62 million scooters in the current financial year as of now. This makes it the third-largest electric two-wheeler player after Ola and TVS, but Bajaj is also closing in. 

According to industry estimates, the sudden reduction of the FAME 2 subsidy midway this year has impacted overall electric two-wheeler sales, which were expected to hit over 1.2 million in FY24. However, most companies estimate that the market will be around 0.9 million this year. 

Estimates say that with or without the subsidy (the signal from the government is that a lower subsidy support will continue for electric two-wheelers), the market for electric scooters, which has consolidated to just four players, is expected to hit 1.9 million by FY 25. By then, companies like Honda will also have their electric motorcycle products in the market.

Pointers

-Started preliminary talks with merchant bankers on an IPO

-To push volumes with the launch of a family scooter early next year.

-Hopes to get volumes of 40,000 per month from the new product

-Will expand its dealership network to 400 by the end of next year

-Estimates that the market for electric two-wheelers will double to 1.9 million in FY25