Key electric two-wheeler EV player, Ather Energy, is set to launch its IPO on April 28. It is set to be one of India’s biggest IPO in 2025, at a time when markets are significantly volatile owing to macro uncertainties. The brokerage house Nuvama Institutional Equities has highlighted that the company will be a key “beneficiary of mega EV trend.”
Nuvama on Ather Energy: Management’s focus on expansion
The company will focus on two new platforms, the first one is EL, which is a scooter platform, and the second one is Zenith for motorcycles. This is likely to expand its addressable market.
Now, the company will be moving its expansion footprint to a non-southern region. For context, the company’s 61% sales in the nine months of FY25 came from the southern region of India.
Further, the company is increasing capacity by 0.5 million units in Phase 1 of its Maharashtra plant, which it would later raise to 1 million units. Once the plant is fully operational, Ather’s total production capacity will touch 1.42 million units.
Nuvama on Ather Energy: Use of raised proceeds
Nuvama saw the company using the IPO proceeds for expansion as a key positive. The management said that the proceeds raised through the fresh issue segment of the IPO, Rs 2,630 crore, will go for building a net plant (Rs 970 crore), R&D (Rs 750 crore), marketing (Rs 300 crore), and debt payment (Rs 40 crore).
The EV firm reported a revenue of Rs 1,580 crore in the first nine months of the financial year 2024-25. This is with an annualised FY25 valuation of 6x P/S at the top end of the IPO valuation of Rs 11,960 crore. The issue is worth Rs 2,980 crore, out of which the fresh issue is of Rs 2,630 crore and an offer for sale, which promoters and other shareholders will pocket, of Rs 350 crore.
Nuvama on Ather Energy: Initiating cost reduction
The company has made significant strides in cost reduction. Its gross margin increased from 7% in FY24 to 17% in the first nine months of FY25, driven by a 31% cut in the BOM (bill of materials) cost for the Ather 450X (2.9 kWh) model. This was achieved through strategic investments in R&D, with BOM cost reductions coming from electronics (18%), mechanical components (6%), and battery parts (7%). Warranty costs per unit were reduced YoY by 29% in FY23, 37% in FY24 and 32% in 9MFY25, reflecting improved product reliability from extensive testing and quality control.