Unfortunately, Ather's initial silent entry could signal unfavorable conditions for the Indian electric scooter and IPO sectors.
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India's electric scooter industry took a dip during Ather Energy's stock market debut, as doubts swirled about the sector's profitability amid a general lull in domestic listings. Ather's shares plummeted more than 4% in Mumbai trading on Tuesday, wiping out initial gains. The company, founded in 2013 and touted as one of India's first electric two-wheeler start-ups, only just managed to oversubscribe its initial public offering with the support of anchor investors like the Abu Dhabi Investment Authority.
The Bengaluru-based company captured a mere 15% of the e-scooter market in the March quarter, lagging behind established competitors like TVS Motor and Bajaj Auto. These rivals have gained ground due to widespread discounting in the industry. Kranthi Bathini, director of equity strategy at WealthMills Securities in Mumbai, commented, "Investors are very selective in choosing IPOs. It's becoming more crowded now, and there's intense competition."
Despite expectations of volume growth in the e-scooter market in India increasing by 25% in the financial year through March 2026, following a surge past 1mn units last year, the industry remains a money-loser for some manufacturers. After the Indian government reduced subsidies last year, Crisil, an Indian rating agency, estimates that it will take approximately three years for some e-scooter manufacturers to break even, with pure e-scooter companies potentially losing up to Rs30,000 per vehicle.
Mumbai-based SBI Securities recommended avoiding Ather's debut due to the company's lack of profitability and mounting competition. Ather's listing comes after the lackluster performance of sector leader Ola Electric's high-profile IPO in August, which has since experienced a 43% drop in shares this year, plagued by drops in sales, customer complaints, and regulatory scrutiny over its bikes.
The sector was expected to see a flurry of IPOs in 2025, following the previous year's bonanza. However, a series of multibillion-dollar listings, including the Indian arm of South Korea's LG, have been delayed. The postponements can be attributed to US President Donald Trump's trade war and a gloomy economic picture in India, with the benchmark BSE Sensex and Nifty 50 indices still below their September peaks after a slump in corporate earnings and a broader economic downturn.
India witnessed $6bn worth of equity capital market deals in the first quarter of 2025, a stark drop from $15.9bn in the same period the previous year. There were 41 IPOs in the first four months of 2025, a halving compared to the same period in 2024. "There's uncertainty because of the tariffs and geopolitical tensions," said Bathini. "Which is why investors are staying away." Devarajan Nambakam, co-head of India investment banking at Goldman Sachs, stated that the current market lull is characterized by "some foreign institutional outflows and a degree of valuation correction."
While investors favored well-established, financially sound companies in Q1 2025, they shied away from riskier or less mature sectors such as electric scooters. Additionally, tech and healthcare, perceived as more stable growth sectors, captured investors' attention instead of new mobility endeavors. The surge in M&A activity might lead companies in sectors like electric scooters to pursue private funding, strategic acquisitions, or delayed public offerings until achieving stronger fundamentals.
- The electric scooter industry's profitability is under scrutiny, as doubts persist amid a weak domestic listing environment, impacting investment decisions in the sector.
- Despite anticipation of growth in the e-scooter market, some manufacturers are still facing losses, causing concern among investors and banking institutions.
- The banking and finance sector is showing preference for established, financially sound companies, as opposed to riskier or less mature sectors like electric scooters and new mobility endeavors.
- The technology and healthcare sectors are garnering investors' attention due to their perceived stability, potentially pushing electric scooter companies towards private funding, acquisitions, or delayed public offerings until they demonstrate stronger financial performance.
