We examine the Bull and Bear case for Ather Energy stock, which got listed today in a muted market.
06 May 2025 | 784 Views | By Ashutosh Radhey Shyam
Bengaluru-based Ahter Energy has got off to a muted start to its life as a listed entity, with the stock trading flat compared to the issue price of Rs 321. We examine the strengths and weaknesses of this R&D-focused EV maker, and assess the stock's long-term prospects.
The Bull ...
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Bengaluru-based Ahter Energy has got off to a muted start to its life as a listed entity, with the stock trading flat compared to the issue price of Rs 321. We examine the strengths and weaknesses of this R&D-focused EV maker, and assess the stock's long-term prospects.
The Bull Case
On the positive side, Ather has attracted marquee investors and commanded a premium valuation compared to Ola Electric, despite a challenging macroeconomic environment and declining foreign investor interest in Indian equities.
One of the anchor investors in the IPO pointed out the firm was betting on the company's strong product focus and efforts to continuously refine the offering.
"It remains one of the few pure-play EV players and will likely benefit from rising EV penetration, even if 2030-31 projections fall short. With the new Maharashtra plant driving higher capacity addition, its growth story gains further credibility,” the investor said, preferring anoynymity.
He added that despite headwinds and incumbents regaining market share, Ather’s volume, product focus, and R&D-led differentiation continue to attract long-term investors. “These startup EV players may face portfolio pressure when incumbents list their EV arms, especially under ESG mandates. But until that happens, startups like Ather will command a premium.”
Investors are also encouraged by Ather's trackrecord of continuous improvement in its financials. The company reported an accumulated loss of ₹3,494 crore as of December 2024, and its net worth had shrunk to just ₹108 crore.
Raising equity was the only viable option to meet debt covenants and secure the financial lifeline needed to maintain operations and growth momentum. Of the ₹2,981 crore raised through the IPO, ₹2,626 crore came from fresh equity issuance, directly improving the company’s net worth, debt-to-equity ratio, and leverage. So what attracted the investors?
1. Improving Financials
Ather’s gross profit margins have steadily improved as it successfully reduced its bill of materials (BOM) through in-house R&D. Gross margins rose from 6.1% in FY22 to 16.1% in the first nine months of FY25. In unit terms, contribution margin rose from ₹10,726 in FY22 to ₹24,634 in FY25 (9M). Notable cost improvements include:
Ather also managed to improve its adjusted gross margin despite declining government subsidies. Subsidies per E2W dropped 77% between FY22 and FY25, yet adjusted gross margins rose to 19% in 9M FY25, up from 7% in FY22. Investors see this as a sign that Ather can remain profitable even in a zero-subsidy environment, supported by better unit economics and scale.
Warranty costs have also fallen significantly, aided by strong battery health (88% after 5–6 years). Operating loss per unit dropped from ₹111,509 in FY22 to ₹37,830 in FY25 (9M). While Ola Electric’s unit loss was ₹33,913 in the same period, its volumes were nearly 3x Ather’s (307,846 units vs. 107,893).
High Focus on R&D
Ather invested ₹765 crore in R&D over the last four years—11–24% of revenue—far higher than the low-single-digit spending by traditional OEMs. It follows a vertically integrated model, designing 80% of key components in-house, including the chassis, battery packs, BMS, motor controller, transmission, and software. Key R&D initiatives include:
The company employs 46% of its workforce in R&D. As of February 2025, it had 303 registered trademarks, 201 designs, and 45 patents, with many more applications pending.
Software Monetization
Through its proprietary software platform Atherstack, the company offers traction control, fall-safe, OTA updates, cloud integration, and navigation. It also offers segment-first features like touchscreen dashboards, 3G SIM connectivity, and fast charging.
As of December 2024:
New Platforms and Capacity Expansion
Ather is developing two new platforms -- EL Platform: A cost-effective scooter platform, and Zenith Platform, targeting 125–300cc motorcycle segment. A new plant in Maharashtra (₹927 crore investment) is planned, with a 0.5 million annual capacity in Phase I (March 2027), scaling up to 1.42 million units across all facilities.
Red Flags
Questionable Capital Allocation
The new plant raises concerns. Existing capacity utilization ranges from 26–40%, and sales over the past two years were only 92,000–110,000 units. The expansion appears premature, especially as incumbents are regaining market share and industry demand remains unproven.
With a typical EV plant setup taking 15–18 months, the company’s optimism about near-term demand seems aggressive.
High Cost of Debt
Ather’s total borrowings stand at ₹1,121 crore—10x its net worth. ₹380 crore of this is high-cost debt, with interest rates up to 14.85%. Yet, only ₹40 crore of the IPO proceeds are allocated for debt repayment. The interest burden will remain heavy despite fundraising.
For now, Ather’s unique positioning, premium product, and strong execution give it an edge—but its capital discipline and execution will determine long-term value.