The Ather Energy IPO finally ended up being subscribed fully on the final day- April 30. Though the retail segment has been subscribed 1.89 times, overall demand trends have been rather subdued. In fact the GMP needle hardly moved in the last 3 days. The question then is what is holding back investors? There are actually many factors responsible for the tepid response.
Ather Energy IPO: 5 reasons why investors are worried
A careful analysis of the Ather Energy DRHP and expert views indicate the 5 key reasons for the flat GMP despite the EV buzz include
1.Valuation Worries: The Deven Choksey Research report clearly put an Avoid rating for the issue. They have raised valuation concerns. This is because, as per the report, Ather Energy has been valued at 6x EV/Sales. This is significantly more expensive than existing listed peers like Bajaj Auto at 5.4x (with electric two-wheelers on offer), TVS Motor at 3.5x (with its electric scooter garnering market share speedily) and Hero MotoCorp at 2.7x. They believe that the Ather Energy stock would possibly be available at more attractive valuation in the secondary market after listing.
2.Profitability Challenges: A careful study of the financials indicate that the company has reported losses in the past three financial years starting FY22. Even the 9mFY25 numbers filed in the DRHP show a loss of Rs 577.9 crore. The Deven Chokesey report also highlighted the challenging path to profitability for this electric two-wheeler maker as one of the reasons for the Avoid rating.
3. Negative cash flow: The other key red flag for the Ather Energy issue has been the negative cash flow by the company. The DRHP stated that the company’s negative cash flow could adversely impact liquidity. It has reported negative cash flow of Rs -228.4 crore in FY22, Rs -871.3 crore in FY23, Rs -267.6 crore in FY24, and Rs -717.1 crore in 9M FY25.
4. Competition concerns: Though Ather Energy has had the advantage of being one of the first movers in the electric two-wheeler space, its market share hasn’t really got the edge. Compared to the 11.5% share in FY24, the 9-month number of 10.7% for FY25 indicate marginal slowdown or almost at the same levels as FY24. With more players joining the fray, the market share runs the risk of declining further.
5. Dependent on Govt initiatives: Another key concern for Ather Energy is the strong dependence on the Govt incentives and policies like PM e-drive. There is also a concern of the possible impact of Govt withdrawing incentives on the retail pricing.
As a result of all these reasons investors are taking more of a wait and watch approach. All eyes are now on the potential listing of the Ather Energy shares on May 6. The GMP indicates it is more likely to list closer to the issue price of Rs 320 per share.