Ather Energy, a prominent manufacturer of electric two-wheelers (e2Ws), has filed preliminary documents with the Securities and Exchange Board of India (SEBI) for an initial public offering (IPO). As outlined in the draft red herring prospectus (DRHP), this IPO will feature a fresh issuance of equity shares amounting to Rs 3,100 crore, alongside a secondary offering of 22 million equity shares by its promoters and existing investor shareholders.
The funds raised from this IPO are intended to support the construction of an e2W manufacturing facility in Maharashtra. The new 3.0 factory, located in Chhatrapati Sambhajinagar (Aurangabad), will be established on a property leased for 95 years. Upon completion of both planned phases, the factory will have an annual production capacity of 1 million e2Ws.
The initial phase of the project, which will be financed through the IPO proceeds, is projected to be completed by March 2027. This phase is expected to achieve a production capacity of 500,000 e2Ws. However, the company has acknowledged potential challenges that could affect the project, such as delays, cost overruns, and disruptions arising from factors like weak market demand, labor issues, technological advancements, and regulatory complexities.
Ather Energy has also highlighted the necessity of obtaining numerous government approvals. Failure to adhere to deadlines or regulatory requirements could result in fines, penalties, or even the forfeiture of the leased property. In addition to the factory construction, a portion of the IPO funds will be allocated to research and development, marketing efforts, infrastructure development, production activities, and other general corporate purposes.
The company’s financial performance has shown a widening of losses for the second consecutive year in FY24 (2023-24), with losses reaching Rs 1,060 crore, compared to Rs 864 crore in the previous fiscal year, as detailed in the DRHP. Ather Energy is the second e2W manufacturer to pursue a public offering, following Ola Electric Mobility’s successful IPO of Rs 6,145 crore in August. Ola Electric, which was valued at $4 billion, saw its shares surge by 20 percent on their debut, hitting the upper trading circuit.
Ola Electric holds the position of the largest e2W seller in India by unit sales, accounting for 35 percent of total e2W registrations in FY24. The company is perceived to have a competitive advantage if the market increasingly shifts towards electric vehicles, which are regarded as the future of mobility.
According to RedSeer, the penetration of e2Ws in India is expected to rise significantly, from 5.4 percent of total two-wheeler registrations in FY24 to between 41 and 56 percent of domestic two-wheeler sales by FY28. The Indian e2W industry is projected to grow at a compound annual growth rate (CAGR) of 11 percent, potentially reaching a market size of $35 billion (Rs 2.8 trillion) to $45 billion (Rs 3.6 trillion) by FY28.
While Ather Energy is preparing for its IPO, it has also pointed out potential cybersecurity risks associated with its e2Ws and internal networks. The DRHP notes the possibility of unauthorized access to its systems, which could have serious repercussions. Although Ather claims to have implemented strong security measures and has not faced significant cybersecurity breaches in the past, it remains cautious about the potential for future hacking attempts targeting its networks, e2Ws, and data systems.
Despite having cybersecurity insurance in place, Ather acknowledges that the coverage may not be entirely comprehensive and may not fully protect against all potential losses. Similarly, Ola Electric’s DRHP also highlights the company’s reliance on various insurance policies to mitigate risks, including cybersecurity, terrorism, fire, accidents, and business interruptions.
While Ola’s insurance is deemed typical for the industry and covers a substantial portion of its assets (ranging from 89.73 percent to 98.26 percent in recent years), the company recognizes that this coverage may not be sufficient to address all potential losses or liabilities. The policies include exclusions and limitations, and some risks may be uninsurable or not covered on commercially acceptable terms.
Ather Energy is a leading Indian electric two-wheeler manufacturer renowned for its innovative e2Ws. Focused on sustainability and cutting-edge technology, the company aims to revolutionize urban mobility with its high-performance electric scooters. With plans to expand production and enhance R&D, Ather Energy is committed to driving the transition to eco-friendly transportation solutions.
