Greaves Electric gets SEBI approval for IPO

Capital market regulator Securities and Exchange Board of India has approved electric vehicle maker Greaves Electric Mobility’s proposed initial public offering (IPO). Greaves Electric is the third electric two-wheeler after Ola Electric and Ather Energy to tap capital markets.

The Bengaluru-based company is the electric mobility arm of Greaves Cotton Ltd. It manufactures and sells electric two-wheelers under the Ampere brand, and electric as well as ICE three-wheelers under Ele, Greaves and Electra brands.

The company had filed a draft red herring prospectus (DRHP) in December. It is planning to raise Rs 1,000 crore (Rs 10 billion) through a fresh issue of shares, while its promoter and investors eyes to sell up to 18.94 crore (189.4 million) shares.

The proposed offer for sale comprises up to 51 million shares from Greaves Cotton Ltd (parent company) and up to 138.4 million shares from investor Abdul Latif Jameel Green Mobility Solutions DMCC.

Currently, Greaves Cotton holds a 62.5% stake in Greaves Electric and Abdul Latif Jameel Green Mobility holds the remaining stake.

The company competes with major players such as Ola Electric, Ather Energy, TVS Motor, Bajaj Auto and Hero MotoCorp. It has a presence in around 27 states with approximately 309 electric two-wheeler and 188 three-wheeler dealers.

Greaves Electric intends to use the net proceeds of the fresh issue for product research and development, build in-house battery assembly capabilities, and boost manufacturing capacity.

Around Rs 375 crore from the proceeds will be used for product and technology development, and enhancing capabilities at its technology center in Bengaluru.

Almost Rs 83 crore will be used to set up an in-house battery pack assembly line at its Ranipet plant in Tamil Nadu by the financial year 2027.

Currently, the automaker purchases assembled battery packs from external suppliers. It has identified 13 suppliers across South-East Asia, China and India for the supply of cells to assemble the battery pack.

The automaker has three manufacturing facilities – Ranipet in Tamil Nadu for electric two-wheelers, Greater Noida in Uttar Pradesh for electric three-wheelers, and Toopran in Telangana for electric and ICE three-wheelers.

It is planning to more than double its production capacity of three-wheelers across its factories in Telangana and Uttar Pradesh by the financial year 2027. The capacity at the Greater Noida plant is being planned to be boosted to 45,896 units from 21,514 units while the capacity at the Toopran plant will be increased to 34,800 units from 13,538 units. 

Meanwhile, Greaves Electric will use Rs 74 crore from the funds raised to increase its stake in subsidiary MLR Auto Ltd, which operates the Toopran facility.

The company now holds a 51% stake in MLR Auto and plans to fully acquire it through the exercise of a call option. Greaves Electric's acquisition of MLR Auto in 2021 helped it enter the L5-three-wheeler segment.

In the financial year 2024, Greaves Electric's revenue from operations was at Rs 611.8 crore, representing a 45.5% year-over-year decline. This reduction in topline is due to a significant fall in the sales volume of electric two-wheelers throughout the year.

Electric two-wheelers contributed around 67% to the company’s top line. However, their sales volume more than halved to 47,820 units during the year from 109,000 units in FY23. Three-wheeler volume, on the other hand, doubled to 13,470 units from the previous year's 6,870 units.

Greaves Electric is yet to report a net profit. In FY24, the company's net loss increased significantly to Rs 680.6 crore from Rs 19.91 crore. This is primarily due to an exceptional item of Rs 477.32 crore recorded as a loss arising from Rs 139.98 crore refunded to the government in 2023 to settle the FAME 2 misappropriation case and subsidy receivables of Rs 337.34 crore