Ather Energy’s highly anticipated IPO is set to make its debut on the stock market today, igniting interest among investors. The issue saw substantial demand, being subscribed 1.50 times overall. Notably, the retail segment saw an impressive 1.89 times subscription, while qualified institutional buyers (QIBs) subscribed at 1.76 times. Interestingly, the grey market premium for Ather’s shares has gained momentum, reflecting a 4% increase from the initial offering price of ₹321 per share. Many are predicting a listing around ₹335, indicating a potential rise of ₹14 from the issue price.

Insights on Ather Energy’s IPO Listing

As market participants gear up for the listing, financial analysts have shared their perspectives on what to expect.

• Deven Choksey, Managing Director of DRChoksey FinServ, remains cautious, stating that they have currently assigned an "Avoid" rating with no immediate price recommendations. He remarked, “Ather is trading at an EV/Sales ratio of 6x, which seems inflated compared to peers. We believe a more attractive valuation may emerge in the secondary market.”

• Ambareesh Baliga, an independent market analyst, anticipates a "flat listing" and warns that the stock might even dip post-listing. He emphasized that the IPO had to be pushed through and noted that no recent developments justify a shift in outlook.

Key Concerns Surrounding Ather Energy

Investors have expressed reservations regarding Ather Energy’s valuation and reliance on government incentives. Here are some pivotal points that investors are considering:

• Dependence on Government Support: Ather Energy has openly acknowledged that its current demand is bolstered by government initiatives, such as the PM E-Drive scheme. This reliance raises concerns about future pricing stability, as retail prices could surge if subsidies are withdrawn. The company aims to diminish its dependence on these incentives over time, acknowledging the unpredictability of policy changes.

• Valuation Apprehensions: Ather Energy’s valuation has drawn scrutiny. According to Deven Choksey’s analysis, its EV/Sales multiple of 6.0x is significantly higher than established competitors like TVS Motor (3.5x), Bajaj Auto (5.4x), and Hero MotoCorp (2.7x). In contrast, Ola Electric trades at 4.7x, while Eicher Motors holds the highest multiple at 9.6x, supported by its robust profitability in the two-wheeler market. This comparative analysis indicates that Ather’s valuation may be excessive relative to its peers.

Conclusion

As Ather Energy prepares to enter the stock market, investor sentiment remains mixed. While the initial subscription figures are promising, underlying concerns regarding valuation and government dependency could impact the stock’s performance. Investors are encouraged to stay informed and consider these factors as they navigate the unfolding situation.

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