Ather Energy looks to raise Rs 3,100 cr

Electric two-wheeler (e2W) maker Ather Energy has submitted preliminary papers to the Securities and Exchange Board of India to raise funds through an initial public offering (IPO).

According to the draft red herring prospectus (DRHP), the IPO will comprise a fresh issue of equity shares valued at Rs 3,100 crore, alongside an offer for sale of 22 million equity shares by its promoters and investor shareholders.

Ather plans to use the funds raised from the IPO to establish an e2W factory in Maharashtra.

The 3.0 factory in Chhatrapati Sambhajinagar (Aurangabad) will be built on a 95-year leased property, with a total production capacity of 1 million e2Ws annually upon the completion of both phases.

The first phase, funded via IPO proceeds, is expected to be completed by March 2027, with a capacity of 500,000 e2Ws.

However, the company notes potential delays, cost overruns, and disruptions due to factors such as weak market demand, labour issues, technological changes, and regulatory hurdles.

Ather also mentioned the need to comply with numerous government approvals, as failure to meet deadlines or regulatory requirements could result in fines, penalties, or the loss of the lease.

Part of the IPO proceeds will also be allocated to research and development, marketing initiatives, infrastructure, production activities, and other general corporate purposes.

The firm s loss widened for at least the second consecutive year in 2023-24 (FY24), reaching Rs 1,060 crore, up from Rs 864 crore the previous year, according to the DRHP.

Ather is the second e2W company seeking to go public after Ola Electric Mobility floated its Rs 6,145 crore IPO in August.

Ola Electric was valued at $4 billion, while Ather Energy has been valued at $2.5 billion, according to a Reuters report.

Ola Electric's shares jumped 20 per cent on their trading debut, hitting the upper circuit.

Ola, the largest e2W seller in India by unit numbers, accounted for 35 per cent of total e2W registrations in FY24.

It is seen as having a head start over its competition if the market shifts towards electric vehicles, which are considered the future of mobility.

According to RedSeer, e2W penetration in India is expected to expand from 5.4 per cent of domestic two-wheeler (2W) registrations in FY24 to 41-56 per cent of domestic 2W sales volume by 2027-28 (FY28).

The Indian e2W industry is projected to grow at a compound annual growth rate of 11 per cent, reaching a size of $35 billion (Rs 2.8 trillion) to $45 billion (Rs 3.6 trillion) by FY28, according to the consultancy firm.

While Ather is preparing for its public debut, it has also highlighted potential cybersecurity risks associated with its e2Ws and internal networks.

In its DRHP, Ather acknowledged the possibility of unauthorised access to its systems, which could lead to major consequences.

Although the company claims to have implemented robust security measures and has not experienced substantial cybersecurity breaches in the past, it cautioned that future attempts by hackers could target its networks, e2Ws, and data systems.

Despite having cybersecurity insurance, Ather stressed that the coverage might not be comprehensive enough to protect against all potential losses.

Ola's DRHP also emphasised the company's reliance on various insurance policies to cover risks such as cybersecurity, terrorism, fire, accidents, and business interruptions.

While Ola maintains insurance that it believes is typical for its industry and covers a sizeable percentage of its assets (ranging from 89.73 per cent to 98.26 per cent in recent years), the company acknowledges that the coverage may not be adequate for all potential losses or liabilities.

The policies contain exclusions and limitations, and some risks are either uninsurable or not covered on commercially acceptable terms.