Is Ather's IPO a smarter bet than Ola in a market running low on charge?

Mint

28-04-2025

After a two-month hiatus, India's primary market is revving back to life with an electric twist. Bengaluru-based Ather Energy, one of the country's earliest electric two-wheeler manufacturers, is set to launch its
₹
2,981 crore initial public offering (IPO).
Backed by automotive giant
Hero MotoCorp
and marquee investor Tiger Global, Ather's listing comes amid choppy market conditions and a cautious investor climate following Ola Electric's underwhelming market debut.
Ola Electric hit the 20% upper circuit on its debut in August but has since slipped, delivering a negative return of over 34% from its listing day high.
Ather's offering includes a fresh issue of
₹
2,626 crore and an offer for sale (OFS) worth
₹
354.76 crore, priced between
₹
304 and
₹
321 per share. This pegs Ather's post-issue valuation at around
₹
12,500 crore—a trimmed figure from its earlier target of around
₹
14,000 crore. The lower valuation reflects a reduced OFS, as several early backers chose to hold on to their stakes, signalling long-term faith in Ather's growth trajectory.
But can this premium two-wheeler electric vehicle brand convince investors it's a smarter bet than Ola in a market that's still figuring out its electric future?
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Ather has not only managed to match traditional power with its 450 model, but its focus on innovation has fueled a string of industry-firsts, from cloud integration and an intuitive touchscreen dashboard with navigation to smart helmet connectivity and "guide-me-home" lights, establishing its premium edge.
The company has ramped up its research and development spending, investing
₹
238.8 crore, which is 15% of revenue in nine months (9MFY25) compared to 13% in 9MFY24. The focus of this investment is on its proprietary Atherstack software and new models like the Ather Rizta.
'As the EV industry is heavily reliant on research and innovation, securing early-stage funding and the ability to refine technology are critical to creating differentiated customer experiences and achieving market acceptance," highlights Saji John, senior research analyst, Geojit Investments. 'In the long run, the companies that succeed will be those offering a compelling value proposition, superior user experience, and reliable service."
Falling unit sales & regional risks
Despite strong fundamentals, Ather has cracks to address. Its revenue per vehicle has dipped from
₹
1.58 lakh in FY22 to
₹
1.43 lakh in FY24—a red flag that suggests either pricing pressure or a pivot toward lower-margin models.
Its asset-light business also gives Ather an edge over others. 'In contrast to Ola, which is positioned as a mass-market scooter brand, Ather has adopted an asset-light business model that provides greater agility over time, particularly since it does not manufacture battery cells," noted John. 'This enables Ather to focus on the premium segment, prioritising high-quality user experiences, " he added.
There is so far some comfort on the valuation front as Ather seems to be entering the market with its feet on the ground. Its price-to-sales (P/S) ratio–an alternate valuation since the company is loss-making–stands at 0.8 for the nine months ending December 2024, far more reasonable than listed peers like TVS Motor, Bajaj Auto, and even Ola Electric.
Mrunmayee Jogalekar, auto and FMCG research analyst from Asit C Mehta Investment Interrmediates, however, suggests caution while reading this metric. 'Ola Electric's IPO was valued at 6.7x P/S at the time of the issue (based on FY24 sales).
However, since the listing just under a year ago, shares of Ola Electric have been on a downward spiral, with current P/S at 4x (based on annualised FY25 sales). With this experience fresh in investors' minds, Ather's issue could see challenges."
'Ather's offer is valued at 5.7x (based on annualised FY25 sales). At these valuations (on P/S basis), these pure-play electric OEMs are quoting higher compared to some of the traditional 2w OEMs, which now have EV businesses housed within the larger entities," he added.
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Where Ather also stands out, is in its capital discipline. Its cash burn ratio– the ratio of total cash spent to total revenue earned from the company's first revenue until it achieves Ebitda positivity or the present date– of 0.6 beats Ola (0.7) and Tesla (1.5), thanks to a leaner business model and cost controls.
New-age companies, in their crucial pre-scaling phase, often experience a "cash burn", a period where spending outpaces earnings. This isn't necessarily a red flag, but rather the cost of laying a robust foundation: intensive investment in product innovation, building core capabilities, establishing brand presence, and often significant outlays for manufacturing and talent acquisition.
'We've built platforms carefully, and as they matured, we focused on gross margins and reduced losses," Tarun Mehta, executive director & CEO told
Mint
in an interview. 'Our pricing discipline and software sales have helped protect margins. In FY25, 86% of our buyers opted for paid software, contributing nearly 6% of revenue at a 53% Ebitda margin."
Furthermore, Ather's heavy reliance on southern India, which accounts for 61% of its sales with limited traction elsewhere and negligible exports, poses a significant risk. This regional concentration increases vulnerability to local disruptions and constrains broader growth potential.
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With a massive share, the company has consistently positioned itself as a leader for several quarters. On expanding footprints, Mehta says his company has gained share in Gujarat from 5% to 25% and Maharashtra recently and is still expanding. 'At 260 stores, we're far behind peers with 700+ outlets. This leaves massive room for scaling," he added.
But the road ahead isn't that smooth. The electric two-wheeler market is now a battlefield, with traditional internal combustion engine (ICE) giants like Bajaj Auto and TVS Motor aggressively ramping up EV offerings. Ather's early-mover advantage is fast eroding as larger players leverage brand
trust
, deep pockets, and scale.
This could squeeze Ather's margins, force higher marketing spends, and delay profitability.
That said, Ather's focus on the premium e-2W segment, scope for software monetisation with scale-up and a capital-efficient strategy gives the company an edge. 'There are levers for improving unit economics driven by new vehicle platforms, reducing the bill of materials, localisation and operating leverage," notes Jogalekar.
However, he feels that scaling up to adequate volumes is dependent not just on internal strategies, but also on the EV penetration trajectory, which has seen a slower climb in nine months to December (9MFY25).
'Increasing EV focus by legacy players such as Bajaj Auto and TVS Motors is heating the competition. This creates uncertainty around the timeline of attaining profitability, even at the EBITDA level. Any impact of tariffs or resulting supply chain disruptions could hamper the profitability journey even more," he added further.
Moreover, the auto segment's revenue streams including the two-wheelers are currently under considerable strain, which is a direct consequence of a noticeable deceleration in demand. This slowdown isn't isolated; it's fueled by a confluence of factors, notably consumers reining in discretionary purchases amidst sluggish wage growth. The recovery in this space hinges on broad-based demand revival.
The hopes are pinned on the growing EV penetration. According to John, 'Ather is well-positioned to ride the EV tailwinds with its differentiated tech stack, growing distribution, and focus on profitability." 'We expect the premium e-2W segment to grow at a 40% CAGR over the next five years."
Electric two-wheelers offer innovative features and a compelling total cost of ownership advantage over ICE vehicles, leading to a surge in penetration to 5.1% in FY24. The cost of economics is improving across the board.
The average battery pack price has fallen from $806/kWh in FY13 to $115/kWh in FY24, and is expected to drop further to $80/kWh by 2030, as per
Crisil
. This trend will shrink the cost gap between EVs and ICE vehicles, aiding adoption.