Ather Energy IPO: GMP slips ahead of subscription opening as revenue stagnant

New Delhi, April 27 Ahead of Ather Energy's initial public offering (IPO) opening for subscription on April 28, the company's grey market premium (GMP) has steadily declined.

According to InvestorGain, Ather Energy’s GMP is currently around Rs 3 -- suggesting just a 0.93 per cent premium over the issue price.

When the issue was first announced on April 22, the GMP was around Rs 17, but it has now fallen to single digits.

The electric two-wheeler maker has fixed a price band of Rs 304-321 per share for its IPO. Investors need to apply for a minimum lot size of 46 equity shares.

The company, backed by investors like Tiger Global, has trimmed its IPO size slightly to Rs 2,981 crore from the earlier plan of Rs 3,100 crore.

The IPO consists of a fresh issue of 8.18 crore shares worth Rs 2,626 crore and an offer for sale (OFS) of 1.1 crore shares.

Promoters Tarun Sanjay Mehta, Swapnil Babanlal Jain, and other corporate shareholders will sell part of their stakes under the OFS.

Ather Energy plans to use the money raised to build a new electric two-wheeler manufacturing plant in Maharashtra and to reduce its existing debt.

If the issue price is fixed at the upper end of the price band, the company’s valuation will reach around Rs 11,956 crore.

The company plans to allocate Rs 750 crore from the IPO proceeds towards research and development. However, Ather admitted there is no certainty that this investment will result in tangible products or successful outcomes.

Ather’s business is mainly concentrated in south India, exposing it to higher risks from regional issues like natural disasters or regulatory changes.

The company also faces intense competition in the Indian automobile market, which could put pressure on its pricing and reduce profit margins.

Additionally, according to several media reports, Ather Energy depends on imports from certain countries, including China, and these imports could be disrupted due to changes in government regulations, economic downturns, or escalating trade tensions.

Meanwhile, the company's red herring prospectus (RHP) reveals that Ather Energy has been incurring losses each year, and there is no certainty about when it will become cost-effective or profitable.

In the financial year 2023-24, Ather Energy reported a pre-tax loss of Rs 1,059.7 crore, a significant increase from its Rs 864.5 crore loss in FY23 and Rs 344.1 crore in FY22.

Its revenue for FY24 was Rs 1,753.8 crore, slightly lower than the Rs 1,780.9 crore recorded in FY23.

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