Synopsis
Ahead of Ather Energy's IPO opening on April 28, the grey market premium has seen a significant drop, raising concerns among investors. With a focus on manufacturing expansion and debt reduction, how will the company navigate its challenging financial landscape?Key Takeaways
- Current GMP is approximately Rs 3, indicating a low premium.
- Ather has reduced its IPO size to Rs 2,981 crore.
- Price band set between Rs 304 and Rs 321 per share.
- Plans to allocate Rs 750 crore for research and development.
- Company faces intense market competition and financial challenges.
New Delhi, April 27 (NationPress) As Ather Energy's initial public offering (IPO) prepares to open for subscription on April 28, the company's grey market premium (GMP) has seen a notable decline.
As reported by InvestorGain, Ather Energy's current GMP stands at approximately Rs 3, indicating merely a 0.93% premium over the issue price.
Initially, when the IPO was announced on April 22, the GMP was around Rs 17, but it has since dropped to single digits.
The electric two-wheeler manufacturer has established a price range of Rs 304-321 per share for its IPO. Investors must apply for a minimum lot size of 46 equity shares.
Backed by investors such as Tiger Global, Ather Energy has slightly reduced its IPO size to Rs 2,981 crore from the previously planned Rs 3,100 crore.
The IPO includes a fresh issue of 8.18 crore shares valued at Rs 2,626 crore, alongside an offer for sale (OFS) of 1.1 crore shares.
Promoters Tarun Sanjay Mehta, Swapnil Babanlal Jain, and other corporate shareholders will divest a portion of their holdings under the OFS.
Ather Energy aims to utilize the funds raised to construct a new electric two-wheeler manufacturing facility in Maharashtra and to alleviate its existing debt.
If the issue price is set at the maximum end of the price range, the company's valuation could reach approximately Rs 11,956 crore.
Ather plans to allocate Rs 750 crore from the IPO proceeds to research and development, though the company acknowledged the uncertainty of this investment yielding successful products.
Ather's operations are primarily focused in southern India, making it vulnerable to regional challenges like natural disasters and regulatory changes.
The company also contends with fierce competition in the Indian automobile sector, which may exert pressure on pricing and profit margins.
Furthermore, multiple media reports indicate that Ather Energy relies on imports from specific countries, including China, which could face disruptions from governmental regulations, economic downturns, or rising trade tensions.
In the meantime, Ather Energy's red herring prospectus (RHP) indicates that the company has been incurring annual losses, with no clear timeline for achieving profitability.
In the fiscal year 2023-24, Ather Energy reported a pre-tax loss of Rs 1,059.7 crore, significantly up 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 dipping from Rs 1,780.9 crore in FY23.
