Ather Energy IPO: Nuvama sees company gaining big, Bernstein cautious on Indian EV startups - Ather Energy IPO: Nuvama sees company gaining big, Bernstein cautious on Indian EV startups BusinessToday (2025)

Ather Energy is all set to launch its Rs 2,981 crore IPO next week, on Monday, April 28, making it the first issue of the financial year 2025-26. It will become India's second pure-play electric vehicle maker after Ola Electric Mobility, which launched its Rs 6,145 crore IPO in August 2024. However, analysts have a mixed view on India's electric two-wheeler (e2W) play.

After meeting the top management of Ather Energy, Nuvama Institutional Equities said that the company is focusing on two new platforms- EL (scooter platform) and Zenith (motorcycle platform), which will expand its addressable market. Also, the network expansion continues, particularly in non-South regions. In 9MFY25, the South region formed 61 per cent of its sales.

The company's capacity is being added through the Maharashtra plant—0.5 million units in Phase 1 would be eventually expanded to 1mn units and IPO fresh issue shall go towards capacity addition, R&D, marketing efforts and debt repayment, it noted. The company shall command a valuation of Rs 11,960 crore.

To recall, Ather Energy will be selling its shares in the range of Rs 304-321 apiece, with a lot size of 46 equity shares, between April 28-30 to raise a total of Rs 2,980.76 crore. The issue includes fresh shares of Rs 2,626 crore and offer-for-sale (OFS) of up to 1,10,51,746 equity shares of the company.

Before the launch of its IPO, Ather Energy has been losing its ground in the unofficial market as the grey market premium (GMP) of the company has dropped to merely Rs 3-5, citing a minimal upside of up to two per cent over the upper end of the price band. The GMP stood at Rs 17-20, when the issue was announced.

India’s electric two-wheeler narrative was dominated by startups, but now it's changing as established OEMs are catching up. Several startups are hence seeking access to public markets, said Bernstein. "We advise caution. We do not consider any unlisted startup a safe investment, although a select few are demonstrating credible models and showing promise in carving out a niche."

The journey to scaling up is fraught with challenges. Don’t be swayed by lower valuation ask or the allure of trading momentum based on the belief that these startups will transition from losses to profitability. While some may succeed in reducing losses, that does not guarantee scalability or justify any valuation. Mainstream startups lacking differentiation and PLI support should be approached with caution, even if they have garnered some traction, said Bernstein.

Axis Capital, HSBC Securities & Capital Markets, JM Financial, Nomura Financial Advisory and Securities (India) are the book running lead managers of the Ather Energy IPO, while Link Intime India is the registrar for the issue. Shares of the company shall be listed at both BSE and NSE on Tuesday, May 06.

Despite its growth initiatives, Ather Energy has been consistently posting losses and carries significant accumulated losses. Its financial performance has resulted in a negative Price-to-Earnings (PE) ratio, and its borrowings stood at over Rs 1,121 crore as of December 31, 2024, which is a point of concern, said Bajaj Broking.

"However, the company benefits from strong parentage, which remains its key strength. Considering its current financials, this appears to be a long-term investment story, and therefore, only well-informed investors with surplus funds and a long-term perspective may consider investing moderately," it said.