Ather Energy IPO lists plenty of EV jargon as risks. Here's what investors must know

Mint

29-04-2025

Ather Energy IPO: After a prolonged waiting period, Ather Energy Limited is finally here with its initial public offering. The IPO, which is the first from a major start-up in FY2026, is a result of careful deliberation and waiting with many market indicators suggesting caution and trepidation from investors. Several of these points of caution have been listed by the brand in its Red Herring Prospectus or RHP. Here's a breakdown of the most important ones.
In an interview with Moneycontrol, Ather Energy co-founder Tarun Mehta stated that the brand's supply chain remains secure in light of China curbing the export of rare earth magnets to India. Magnets are critical to the production of the electric motors used in electric scooters. This is largely due to the fact that Ather does not manufacture or design its motor in-house. In fact, the manufacturing of every component other than the battery pack (which is assembled in-house), as highlighted in the RHP, remains outsourced. This includes battery cells, chassis, transmission, motor controller etc, which, while being designed in-house, are manufactured by a third-party. Net result: if the suppliers aren't able to provide the components on time, or at previously agreed-upon rates, it can send disruptive ripples throughout the supply chain, causing delays in production and delivery timelines.
Despite being a pioneering brand and having a first-mover advantage, Ather Energy is now surrounded by legacy players with considerably more resources and higher brand equity. These brands, which include the newly crowned market leader Bajaj Auto (on account of the Chetak) TVS Motors and Ola Electric. Although Ather has several patents and proprietary features in terms of the Ather Grid, True Range, Ather App etc – it doesn't operate at the same scale as its rivals. Not yet anyway. It's also the only one among the four to not avail any PLIs from the government. The RHP goes on the cite a CRISIL report repeatedly pointing out that the expansion of legacy players (Bajaj Auto, TVS) has posed challenges to newcomers like Ather Energy, which is investing heavily in future tech, expanding production and developing more proprietary technology that will help e-scooters have a clear edge over e-scooters both in terms of TCS and ease-of-use.
It should come as no surprise that none of the new-age e2w manufacturers are breaking even or turning a profit. This is largely down to the capital-intensive nature of e2w and the less-than-stellar demand for the same, especially in view of lacklustre rebates and benefits.
For Ather, despite its strong brand image, sales volumes remain lower than those of Ola, Bajaj Chetak and TVS Motors iQube. According to the RHP, ICE scooters continue to make up 85.3% of domestic scooter sales in FY2024, while e-scooters made up 14.7%. While this number is growing on a year-on-year basis, brands like Ather Energy are investing heavily in new manufacturing facilities, R&D expenditures for the design and development costs of key components, Atherstack, and the new e-motorcycle platform. Despite brands like Ola Electric, Revolt and Ultraviolette entering the e-motorcycle space, the segment is yet to find any traction in the market and remains one of the most underperforming ones in the 2W space. In short, high operational costs, high purchasing costs, challenges in scalability and inconsistent incentives mean that it'll be a while before Ather Energy is profitable.
The policy framework surrounding electric vehicle manufacturing in India remains patchwork and inconsistent. Many manufacturers, both of two and four-wheelers, have demanded long-term policy consistency from the government so they (brands) can entrench themselves in the EV ecosystem with long-term investments. However, the absence of strong incentives, along with possible developments in alternative fuel and hydrogen fuel cell space, make it clear that EVs may not be the only way to go in the future, even in the e2W space. The RHP also highlights present-day issues that ensure low market penetration. Issues such as poor resale value of e-scooters, the diminishing performance of lithium-ion batteries, which yield lower performance and range unlike a well-maintained ICE scooter, rising electricity costs, financing options for EVs, higher insurance premiums and more. As of the current financial year, a customer can only avail a maximum rebate of ₹ 5000 upon purchase of an Ather e-scooter.
As a brand that sources its battery cells entirely from China, Ather is legally obligated to point out that when it comes to its battery supply chain, it remains wholly reliant on both China and South Korea. This in turn makes the brand vulnerable to acute fluctuations in both the pricing and the quality of lithium-ion cells, as, by its own admission, purchase agreements with cell suppliers do not include terms such as price and quantum. Fluctuations in quality make the brand vulnerable to recalls by the supplier, given the inherently combustible nature of lithium-ion cells and the need to safeguard the battery pack against potential thermal runaway. Given that growth in EV sales is not necessarily commensurate with the growth in production of battery cells, means that the same suppliers can limit the availability of said cells to a particular brand, as they are liable to have multiple customers.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
First Published: 29 Apr 2025, 09:56 AM IST