Ather Energy IPO analysis

Ather Energy IPO (initial public offering) will open for subscription on April 28, 2025, and close on April 30, 2025. Below is a breakdown of the electric two-wheeler maker's strengths, weaknesses and growth prospects to help investors make an informed decision. Ather Energy IPO in a nutshell Quality: Between FY22 and FY24, Ather Energy reported an average return on equity (ROE) and return on capital employed (ROCE) of around -181 and -71 per cent, respectively. Growth: Between FY22 and FY24, its revenue grew 107 per cent and net losses widened 76 per cent annually, respectively. Valuation: At the upper price band of Rs 321, the stock is expected to be valued at a P/B ratio of 4.4 times. The P/E ratio can't be calculated since the company is loss-making. Overview: India is the world's largest two-wheeler market by volume. Of this, the electric two-wheeler (E2W) segment is projected to clock a healthy 41 per cent annual growth with EV penetration expected to reach 35 per cent of two-wheeler industry sales by FY31. These tailwinds support the outlook for Ather Energy. However, the intense competition in the industry and the growing market share of incumbents remain key risks. About Ather Energy The company is India's third-largest electric two-wheeler player by volume (as of FY24). It also supplies EV charging infrastructure and smart accessories. The company manufactures battery packs in-house, while portable chargers, motors, etc., are outsourced to suppliers for manufacturing. The company has a total annual installed capacity of 4.2 lakh units, which currently operates at 39 per cent capacity utilisation. Apart from vehicle sales, Ather earns a small 6 per cent chunk of revenue from its Atherstack software for ride-assist features to customers. Strengths of Ather Energy Dominant market position: Despite the entry of incumbents in the E2W space, Ather Energy has managed to steadily increase its market share from 7.9 per cent in FY22 to 11.5 per cent in FY24. This suggests a strong market presence and brand recognition. Weaknesses of Ather Energy Geographic concentration: As of FY24, almost 68 per cent of the company's sales volume were concentrated in South India. This reliance on one particular region exposes it to risks such as economic disruptions, political or social unrest, or changes in state-specific policies that could impact its financials. Expensive pricing: Ather's pricing is relatively higher than competitors' due to a few hi-tech features like smart helmet integration and inter-city trip planners. Its starting price point is Rs 1.1 lakh compared to Ola Electric's Rs 80,000. Such a price differential could impact sales in a market that's highly competitive. Ather's sales from April to December 2024, for instance, was 1 lakh compared to Ola's 3 lakh units. Ather Energy IPO details Total IPO size (Rs cr) 2981 Offer for sale (Rs cr) 355 Fresh issue (Rs cr) 2626 Price band (Rs) 304 - 321 Subscription dates April 28-30, 2025 Purpose of issue To fund capital expenditure, research & development and marketing initiatives Post-IPO M-cap (Rs cr) 11,956 Net worth (Rs cr) 2,734 Promoter holding (%) 42.1 Price-to-earnings ratio (P/E) - Price-to-book ratio (P/B) 4.4 Financial history Key financials (Rs cr) 2Y annual growth (%)