Mumbai: Businesses not availing Production-Linked Incentive (PLI) scheme tend to be more "disciplined" in capital (allocation) besides more durable in pricing and margins, Ather Energy Co-founder and CEO Tarun Mehta said on Tuesday as the shares of his company started trading on stock exchanges after a Rs 2,981-crore public float. Mehta also sounded bullish on the domestic EV industry and said that Ather was set to play a major part in the domestic premium e-two-wheeler space with plans to expand both product offerings and distribution network.
The Rs 2,981-crore initial share sale had a price band of Rs 304-321 apiece and shares listed with a premium of over 2 percent against the issue price. The initial public offering (IPO) was a combination of a fresh issue of equity shares worth Rs 2,626 crore and an offer-for-sale of 1.1 crore equity shares by promoters and other shareholders.
"I think not having PLI forces the business to be very disciplined with capital. PLI is not a 20-year scheme. It's another few years left. As you start emerging out of such a scheme, balance sheets that never had a dependency on this support are going to be the strongest ones," Mehta said when asked how he was looking to face competition from those availing of such a scheme.
He said that the pricing as well as the margins of the business not having PLI was going to be more durable and consistent and added that though the early years looked harder, they have prepared the company for an easier drive in the coming years. Stating that the company's focus is a "bit different" as it bets heavily on the premiumisation of the industry.
"We believe Indian consumers are upgrading in huge volumes and that is the customer Ather is going after. We want to build one of the strongest premium places in the electric two-wheeler business backed by very solid investment in R&D and engineering, which will give us a very strong quality reputation," Mehta said.
Overall, on technology, the company has been investing a lot, which is why its investments in software have been high and that has helped it unlock a lot of value out of it, he said.
"We sell software basically separately on top of the vehicle. As much as 86 percent of our customers buy that product, which is a 53 percent EBITDA margin product or in a way already 6 percent of our top line. So, these are some of the unique strengths of our business, which is why we believe long term these factors will hold the business in good stead," Mehta stated.
"The margins have doubled-- from 9 percent in FY24 to 19 percent in FY25-- on the back of all these strategies and are expected to continue trending strongly with a lot of cost reductions ahead of us," he said. He said that premium is on a tear in India right now with the 125-cc segment market share jumping to about 50 percent of the industry in FY24 from 20 percent of the industry in 2019.
And this is likely to trend even higher and this is how the premium segment is taking off, he added. According to him, the company saw volume growth of 45 percent in the previous fiscal on the back of strong products with a lot of cost engineering, and not on the back of discounting. "And that's a very sustainable margin and very strong growth. And as we now add hundreds of new stores pushing in the northern markets of India, we believe this growth trajectory will continue," he said.
"So, growth is going to be very strong and (we are) very bullish about it. Margins have trended really well, and I think there's a lot of upside on margins because of cost reductions, new factories, new platforms, so on and forth. So, we all feel really bullish about getting to profitability," Mehta said. On the public float, Mehta said it saw strong institutional demand, even in the fairly volatile market conditions, besides very strong retail participation, adding that retail was actually oversubscribed.
"So, especially in this market where retail and HNI otherwise were pretty sparse, I think this speaks volumes about the brand that we have built," he said.
