Ather Energy IPO: Electrifying Opportunity or High-Voltage Hype?

Animal spirits are back. After months of volatility, fears over tariffs have eased a bit, and the IPO market is beginning to stir once again.

One of the most talked-about names in this new wave is Ather Energy, the electric two-wheeler manufacturer backed by Hero MotoCorp.

The company is gearing up for its IPO, scheduled to open on 28th April and the buzz is unmistakable.

The price band is set between Rs 304 and Rs 321 per share, which implies a valuation close to Rs 120 bn. That's quite a number for a relatively young player in a still-nascent industry.

Now, to be fair, Ather deserves some credit. It's one of the early movers in India's electric two-wheeler space, and the demand for 2 wheeler EVs seems promising. The proceeds from the IPO will go toward ramping up manufacturing capacity and R&D - much-needed steps if we are to see widespread EV penetration in India.

From a macro perspective, competition in this space is a good thing. It forces innovation and brings down prices for consumers. So, in that sense, Ather's IPO is a positive development.

But before you get swept away by the excitement, it's worth pausing and asking a few hard questions. And here's where things start getting a bit tricky.

Like many new-age companies, Ather is not profitable.

In fact, it's yet another loss-making business coming to market. That means, from a valuation standpoint, we're largely in the dark. There are no earnings to anchor expectations. We're left relying on projections, potential, and narratives - which, as we've seen before, can be a trap.

The company has already cut its valuation by 30%, according to reports from Economic Times, due to market conditions. That should raise eyebrows. If the business has big potential, why settle for less?

And let's not forget the risks. There are plenty.

A potential economic slowdown could hurt discretionary spending. Supply chain vulnerabilities and raw material price fluctuations remain concerns.

And then there's policy risk- any adverse change in government subsidies or EV regulations could throw off the entire business model.

In other words, it's not just about building cool scooters. It's about navigating a complex, ever-evolving ecosystem.

Now, I've said this before, and I'll say it again: IPO isn't always the best time to invest in a business. And when it comes to loss-making startups, the risks go up several notches.

You're not buying into a proven track record - you're betting on a story, and stories can change very quickly.

If I were looking to ride the EV wave, I'd rather play it smart. There are several proxy plays worth keeping an eye on - companies like SJS Enterprises, Fiem Industries, Pricol, Shriram Pistons, and others that supply components to EV manufacturers.

No view is implied here. These are not recommendations.

These businesses have good cash flows, long operational histories, and they stand to benefit from rising EV adoption - without the sky-high valuations.

But if you still think this time it's different, let me draw your attention to a recent cautionary tale: Ecom Express.

Not too long ago, Ecom Express was preparing for its own IPO. It proudly claimed to be India's only pure-play B2C e-commerce logistics provider, with a market share of 27% and coverage across over 27,000 PIN codes.

Back in 2022, the company was valued at Rs 70 bn. The IPO proposal had a hefty Rs 26 bn offer size, with half of it aimed at giving existing investors a clean exit.

Then came the unravelling.

75% of Ecom Express's revenue came from just five customers, with one single client accounting for a massive 52%. That's a glaring concentration risk.

When this top customer decided to take logistics in-house, Ecom's business was hit hard. Others followed suit. Add to that the tragic passing of co-founder TA Krishnan and the exit of other senior leaders, and the company found itself rudderless.

Today, that same company is being acquired by Delhivery for just Rs 14 bn - an 80% drop in valuation.

Just imagine the damage that IPO could have done to unsuspecting retail investors, allured by the size, the jargon, and the "next big thing" pitch.

A bullet dodged. But the lessons? They're timeless.

As Warren Buffett famously said:

"It is almost a mathematical impossibility to imagine that, out of the thousands of things for sale on a given day, the most attractively priced is the one being sold by a knowledgeable seller to a less-knowledgeable buyer."

The bottom line?

Don't fall for the hype. Whether it's EVs, AI, or the latest shiny tech trend - always look beyond the story. Focus on substance over speculation.

And remember: sometimes, the best investment decision is the one you don't make.

Warm regards,


Richa Agarwal
Editor and Research Analyst, Hidden Treasure
Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst)