Competitive Strengths

E2Ws are positioned at a premium price within their respective segments in the Indian E2W market Company’s focus on quality and user experience enables them to position their E2Ws at a premium price. As of December 31, 2024, they had 4,535 unique tests to validate all components of their E2W. Their service network is designed to be accessible and efficient, with an average turnaround time of 4.8 hours for their standard periodic maintenance in the 9 months ended December 31, 2024. The company announced the launch of Ather Gold service centres in December 2024, which designed to provide an upgraded service experience. The 1st Ather Gold service centre was opened in Trivandrum Kerala, India in January 2025. Company’s investments in ensuring quality and user experience allow them to command a premium price for their E2Ws in each of their respective segments. This is reflected in their sales growth to 107,983 E2Ws in the 9 months ended December 31, 2024, from 23,402 E2Ws in Fiscal Year 2022.

Vertically integrated approach to product design with strong in-house R&D capabilities Company’s control over the design of key components of their E2Ws and accessories, including the underlying software, gives them speed to market, control over quality, cost management capabilities, access to partnerships with large technology companies and the ability to deliver an improved user experience.

They made 204 component upgrades in Fiscal Year 2024 via engineering changes, which enabled them to drive higher sales volumes and adapt to market developments. During Fiscal Year 2024, they also implemented 91 engineering modifications, further reducing their bill of materials (“BOM”) costs. Additionally, in April 2024, they launched the Ather Rizta series, which features an average BOM cost that is 7% lower than that of the Ather 450 series as of December 31, 2024.

Ability to pioneer new technologies Ather entered the market in 2018 with the Ather 450 model and has introduced several technologies 1st to the E2W market. They were also the 1st OEM to introduce an electric scooter with a high speed of 80 kmph, 1st OEM to establish its own fast charging network (Ather Grid) and also the 1st OEM to develop a smart helmet (Halo).

Ather invested Rs.239 crores, Rs.164 crores, Rs.237 crores, Rs.192 crores and Rs.101 crores in R&D in the 9 months ended December 31, 2024, and 2023 and FY 2024, 2023 and 2022, respectively. As of December 31, 2024, their R&D team had 731 on-roll employees who made up 46% of the total workforce. They were the 3rd and 4th largest E2W manufacturer by sales in India as of March 31, 2024, and December 31, 2024, respectively. They seek to further expand their market share with the launch of their latest convenience scooter, the Ather Rizta to serve a broader range of customers.

Software-defined ecosystem that drives customer engagement and margins
The in-house developed Atherstack, the software-defined ecosystem aims to improve user experience and drive customer engagement. The continued innovation and improvements to their product ecosystem generate a flywheel effect. Continuous technological upgrades enhance the products’ appeal to customers, enabling them to grow their customer base and harness more user data.

Ather receive data from multiple sources such as the Ather App, their E2Ws, charging infrastructure, smart accessories and other information systems. The data from these sources is processed by the Ather Data Platform, which gives them intelligence on customer cohort usage patterns, product performance, post-sales journey and charging insights. As of December 31, 2024, 86% of customers who purchased the E2Ws also purchased access to the advanced features of the Atherstack. They had 308,067 monthly active users on the Ather app, as of December 31, 2024.

Scalable technology platform enabling accelerated product launches
As of December 31, 2024, company’s scooters based on the Ather 450 platform have clocked 4.11 billion kilometres since launch. Their technology platform offers scalability, adaptability and cost structures that accelerate the development of new products. While they have accelerated their product launch times, they have maintained their focus on quality controls for their products. As of December 31, 2024, their batteries’ median state of health remained at 88% in scooters that are between 5 and 6 years old.

Market opportunity India was the largest motorized 2W market by volume in the world in 2023. Total domestic sales in Fiscal Year 2024 were 1.84 crores units. In the 9 months ended December 31, 2024, the India 2W market recorded sales of 1.53 crores units, positioning themselves for sustained growth in Fiscal Year 2025. This performance marks a 11% year-on-year increase compared to the 9 months ended December 31, 2023. The Indian 2W market is expected to further grow at a CAGR of approximately ~7% between Fiscal Years 2024 and 2031 to reach a market size of 2.9 to 3 crores in FY2031. Apart from domestic sales, Indian 2Ws are also exported. Such exports accounted for approximately 17% of the overall Indian 2W sales in the 9 months ended December 31, 2024. Indian OEMs exported 3.1 million and 3.5 million 2Ws in the 9 months ended December 31, 2024, and FY2024 respectively, primarily to Africa, Asia and North America.

India’s middle class is expected to grow to a population of 71.5 crores by FY 2031 from 43.2 crores in Fiscal Year 2021. India’s per capita income is expected to grow at 9.2% CAGR over 2024 to 2029. The growth in per capita income and discretionary spending is expected to lead to a corresponding increase in the demand for premium products and experiences. There is a clear shift towards preferences for more premium vehicles within the 2W industry. In the last 5 years, the share of motorcycles and scooters with an engine capacity of 125cc and beyond increased from approximately 38% and 20% in FY 2019, respectively to approximately 52% and 47% in FY2024, respectively. Younger buyer profiles, new vehicles with attractive features launched at competitive rates, and increasing financing support have supported this premiumisation trend within the 2W industry.

An expanding E2W portfolio of technology-rich vehicles has driven consumer interest in and accelerated the growth of E2Ws in India. E2Ws currently offer advanced technological features such as touch screen displays, Bluetooth and LTE connectivity. Further, E2Ws also offer a lower total cost of ownership (“TCO”) as compared to ICE vehicles. In FY2025, the TCO of an E2W, including subsidies, was 52% lower than that of an ICE 2W for an annual running range of 8,000 km for the same period. Assuming that the current GST structure will continue to FY2032, and that some of the subsidies will be provided until FY2032, the acquisition cost (ex-showroom price) between an E2W and ICE 2W is projected to shrink to approximately 5% by FY2032.

In FY2024, E2W penetration rose to 5.1% and EV penetration in the scooter segment increased to around 14.7%. In the 9 months ended December 31, 2024, EV penetration reached around 5.5% with EV volumes totalling 0.84 million units. During this period, the share of e-scooters increased to 15.2%, underpinned by the continued policy support. This led to a decrease in the market share of ICE scooters to 84.8% in the 9 months ended December 31, 2024, from 85.3% in Fiscal Year 2024.

Reduction in the acquisition price gap coupled with the wide range of technological features offered by E2Ws is expected to further drive EV penetration. Scooters are expected to lead the electrification of the 2W market in India, with the penetration of electric scooters expected to reach approximately 70% by Fiscal Year 2031 and the penetration of electric motorcycles expected to reach approximately 10% by FY2031. The E2W segment is expected to grow at a CAGR of approximately 41% to 44% to reach a market size of approximately 1.03 crores to 1.23 crores units by FY2031. Such expansion will make it one of the fastest growing segments in the automotive industry in India.

Moreover, with India being one of the largest 2W domestic markets globally, it has a unique opportunity to leverage its domestic market scale and manufacturing competitiveness for the export market. This together with the industry-wide trend of electrification affords Indian E2Ws an opportunity to amass a larger share of the global 2W market. The global 2W market is expected to reach 8 to 8.2 crore units by 2029.

The trends of electrification and premiumisation hence present a large domestic and international opportunity for E2W players. Quality, software capabilities, control over design of key components, unit economics, capital efficiency and supply chain resilience are key factors for success in EVs. Company’s emphasis on all of the above, coupled with their focused product strategy, position them well to capture the opportunities presented by the shifting consumer preferences and trends of electrification in India and globally.

The company’s business model is built on four key pillars vertically integrated approach to design, (ii) software-defined ecosystem, (iii) premium positioning, and (iv) capital efficient approach to business operations across the value chain. This business model is designed to deliver products focused on quality and user experience.

Peer Comparison

Key Risks & Concerns

Loss of key suppliers: AEL relies on suppliers to provide EV components used in assembling E2Ws in- house. Any loss of key suppliers, or any failure or refusal by them to supply such components to the company could cause business disruptions.

Loss making business: Ather has incurred losses since incorporation. It had stagnant revenue growth in Fiscal Year 2024 and loss before tax of Rs.578 cr and Rs.1060 cr in the nine months ended December 31, 2024 and Fiscal Year 2024, respectively. It may continue to incur operating losses as it continues to invest in expanding manufacturing capabilities, distribution network, product portfolio and charging infrastructure. It may not realize expected returns from such investments in the future. There is also no assurance that it will be able to increase revenue in the future.

Negative cash flows: AEL has incurred negative cash flows from operations continuously since incorporation. It had net cash used in operating activities of Rs.717 cr and Rs.268 cr in the nine months ended December 31, 2024 and Fiscal Year 2024, respectively. Negative cash flows may adversely impact liquidity and prospects.

Operates in a competitive industry: AEL operates in the competitive Indian automobile market, which may face downward pricing pressures that may require to reduce the price of electric two-wheelers. A reduction in the price of electric two-wheelers will reduce profitability, which will adversely affect business, prospects and results of operations.

Outlook and Valuation

AEL is a pure-play electric vehicle (EV) company specializing in the sale of electric two-wheelers (E2Ws), batteries, and other related products. It is in the process of expanding its manufacturing capacity by setting up a new unit in Maharashtra. Despite its growth initiatives, the company has been consistently posting losses and carries significant accumulated losses. Its borrowings stood at over Rs.1121 crores as of December 31, 2024, which is a point of concern. The company has certain legitimate risks associated with the business like it’s a loss making entity, negative cash flows, and reduction in government subsidies potentially impacting volume growth, high debt, competitive intensity, pricing pressure.

Over the past three financial years, the company, on a consolidated basis, has reported total income and net profit/(loss) figures of Rs.413.80 crores and (Rs.344.10) crores for FY22, Rs.1801.80 crores and (Rs.864.50) crores for FY23, and Rs.1789.10 crores and (Rs.1059.70) crores for FY24. For the nine months ended December 31, 2024 (9M FY25), it posted a loss of Rs.577.90 crores on a total income of Rs.1617.40 crores, as against a loss of Rs.766.40 crores on a total income of Rs.1253.70 crores for the corresponding period in the previous year. It is our belief that the company may require more time to reach profitability.

At the upper end of the price band, the issue is priced at 6.2x EV/Sales on FY24 basis which is at elevated level in our view. We recommend an AVOID rating to the risky issue on account of uncertain demand, high competition intensity & elevated valuation.

Key Information

Use of Proceeds: The total issue size is Rs.2981.06 cr, which comprises of a free issue of Rs.2626.30 cr and an Offer for Sale worth Rs.354.76 cr. From the net proceeds of the issue, the company will utilize Rs.927.2 cr towards Capital expenditure to be incurred by the Company for establishment of an E2W factory in Maharashtra, India, Repayment/ pre-payment, in full or part, of certain borrowings availed by the Company (Rs.40 cr), Investment in research and development (Rs.750 cr), Expenditure towards marketing initiatives (Rs.300 cr) and rest for general corporate purposes.

Book running lead managers: Axis Capital Limited, HSBC Securities and Capital Markets (India) Private Limited, JM Financial Limited, Nomura Financial Advisory and Securities (India) Private Limited

Management: Tarun Sanjay Mehta (Executive Director and Chief Executive Officer), Swapnil Babanlal Jain (Executive Director and Chief Technical Officer ), Niranjan Kumar Gupta (Non-executive Director (nominee of HMCL), Nilesh Shrivastava (Nominee Director (nominee of National Investment and Infrastructure Fund II), Pankaj Sood (Nominee Director (nominee of Caladium Investment Pte Ltd), Ram Kuppuswamy ( Non-executive Director(nominee of HMCL), Kaushik Dutta (Independent Director), Sohil Dilipkumar Parekh (Chief Financial Officer).