Ather’s IPO would be the second-largest in the sector after Ola Electric, which listed in August 2024. Ola currently has a market cap of USD 2.54 bn, down 33% from its market cap of about USD 3.75 bn at the time of listing, and down 67% from its peak market cap.
Ather is starting a USD 350m IPO, which values the company at about USD 1.4bn. Like Ola Electric, Ather is some time away from profitability. In the absence of any profitability metrics, and the fact that we are not equity analysts, we would skip the part where we say whether the price is good or bad.
Instead, this analysis is about looking at what works for Ather Energy and what does not.
Marketshare Trends
Ather made admirable improvements in market share as the overall market also grew. The trend here is that while the company had a 6-8% market share in April-June 2024, it has maintained an 11-16% market share over the last six months.
Interestingly, it does not appear that the market share gains have come through discounting. We calculated that the transaction prices of the Ather 450X 3.7 kWh are nearly INR 145,000, that of the Ather 450 Apex is INR 171,000, and that of the Rizta Z 3.7 kWh is above INR 139,000. These are very close to the declared sticker prices, indicating very little or no discounting at the retail level.
Product Mix
From Ather’s RHP:
As part of its RHP, Ather provides a breakdown of sales between its two model ranges – 450X and Ritz, as well as individual variants within each range. The 450X 3.7 kWh remains the most significant contributor to sales, selling 25,835 units out of a total of 107,983 units in the first nine months.
Overall, the Rizta range and the 450X have an equal split of sales, and that’s a good thing. While Rizta probably has the better margins, Ather needs the 450 range to remain popular, as that is the brand builder for enthusiasts.
Revenue, Gross Margins, and Losses
We know the story here, and there are more qualified internet sources with better information. This is to leave you with an idea of where Ather stands today on core financials.
While losses have been climbing every financial year, there is a sharp improvement in the financials when comparing the first nine months of FY2025 to FY2024. This should be because of the Rizta scooter, which has a likely lower bill of materials (BoM) cost than the 450 range.
We have also noticed that company financials improve before an IPO, as we saw with Ola. Management is the most focused on taking measures to make the company more IPO-worthy.
In the case of Ather, the company is nowhere near profitability, but the nine-month financials indicate that it is on the right track.
The Move to Profitability
From the Ather Energy RHP, this is how the bill of materials (BoM) costs for the 450X range are split between Mechanical, Battery Pack, and Electronics. Note that this indicates only the split comparison between the three elements as of December 2024 vs March 2023.
Ather further states that they have achieved a 31% reduction in BoM costs over three years. Surprisingly, only 7% of the overall reduction came from battery packs.
Separately, global battery prices dropped as reported by Bloomberg NEF in December 2024.
Between 2021 and 2024, global battery prices at the pack level dropped by 26%. While we understand that most of the price drop is enjoyed by Mainland China, we still feel that there is a buffer in battery prices, a gap that Ather can exploit in the future.
Considerable cost optimisation on the battery pack front can happen if Ather moves to LFP chemistry. This is what they plan to do when they move to the upcoming EL platform.
The above graphic suggests that the EL platform may be only used for Convenience scooters like the Rizta and not performance scooters like the 450X.
Further, from the Ather RHP:
We are currently developing two new E2W platforms: a new scooter platform (the EL platform) and a motorcycle platform (the Zenith platform). The EL platform, which is in an advanced stage of development, will serve as a more cost-effective and versatile platform for our scooter lines. It will incorporate a new powertrain, electronics and chassis platform, while utilising elements of the battery and Atherstack from the Ather 450 platform. The EL platform will allow us to develop a diverse range of scooter models tailored to various domestic and international markets needs, and reduce our costs. Additionally, we are developing our Zenith platform, which is designed to support new E2W models targeting the 125 cc to 300 cc motorcycle segments. According to the CRISIL Report, motorcycles accounted for 62% and 63% of the Indian 2W market in the nine months ended December 31, 2024 and Fiscal Year 2024, respectively. The motorcycle segment presents a significant opportunity for us to expand our addressable market.
Further, we are in the process of designing a new battery platform using the lithium-iron phosphate (“LFP”) cathode chemistry to augment our existing battery platform. This new battery platform is expected to be compatible with some of our existing products and leverage the price difference between LFP and nickel-based chemistries. We are exploring the use of heavy rare earth-free and rare earth magnet-free motors to reduce our dependence on the rare earth metals while reducing our costs. Additionally, we will continue to invest significant efforts in the expansion of our software capabilities and improve our ecosystem products. We will leverage our multidisciplinary R&D capabilities to expand the ‘Ride Assist’ features in the Atherstack, which is an Advanced Rider Assistance System to enhance rider safety, comfort and overall user experience through the integration of sensors, communication systems and artificial intelligence. We will continue upgrading our charging technology, and expanding our accessories portfolio and the Atherstack feature set. We will also continue to leverage the insights gained from usage patterns of customer cohorts to build new products that enhance the user experience.
The above literally covers every prospective future tech that the world is working on. We don’t doubt Ather when it comes to developing things, but often these perfectionists spend a lot of time on development.
The first Ather 450 was launched in September 2018, and the second proper scooter, the Rizta, came in April 2024, a gap of 5.5 years. This is not to say that the EL or the Zenith would take another five-odd years to come, but yes, Ather does take time in developing products.
That is not a negative. This is what makes Ather and the industry better for that.
Speaking of the Zenith, this is what they have in the RHP.
This looks like a 125cc+ motorcycle, which likely means an 11kW motor that will help them target beginner segments in global markets.
Strong R&D Focus
Ather’s strong engineering focus is reflected in the R&D expenditure as a share of revenues. It maintains a healthy expenditure of more than 8% on R&D as a share of its revenue. This is likely to drop some as revenues improve while they optimise product development.
Ather’s approach to development is more old-school, traditional OEM like of designing most of the important components themselves and outsourcing the manufacturing.
Share of Revenues from Software Sales
Every automotive manufacturer wants a share of its revenues to come from software sales, as that adds a high-margin layer over the hardware. Ather sells the Atherstack software suite on its scooters. The revenue from that has been increasing, but look at it as a share of overall revenues, and it has stayed flat.
Attrition Rates
A few months back, the media reported that Ola Electric had a high attrition rate. In that light, Ather seems to be a very stable ship with an attrition rate of 9%. The rate has actually improved (declined) year-on-year in a market where there is a severe talent crisis.
Warranty Costs
This is another area where Ather seems to be doing well. Warranty costs have declined since 2023.
The Need for a New Plant
Ather says that it would be using nearly USD 110m of the IPO proceeds to set up a new plant in the state of Maharashtra.
We agree that a new plant in the western part of the country would optimise logistics for the company. The new plant would be about 1000 km from Ather’s existing plant in Hosur. The western part of the country is attractive for EV sales, and any improvement in logistics costs would be a positive.
At the same time, Ather’s current capacity utilisation stands at 39%, so it’s not that the company is running out of capacity in a hurry.
The Inevitable Comparison with Ola Electric The street often compares Ather to Ola Electric, considering both companies are in the same industry, the same city, and the same market. However, that’s never a fair comparison. Ather has a strong engineering team and has built a brand on tech, product, and reliability.
Meanwhile, Ola is more commercial and focused on distribution. The company is only now developing its first-ever product from scratch in the Roadster X motorcycle. At the same time, they have 4000 sales outlets, compared to 280 for Ather. That, at the current run-rate, puts the monthly scooter sales per outlet as 6 for Ola and 55 for Ather Energy, a strong positive for Ather.
