India’s largest two-wheeler manufacturer, Hero MotoCorp, has received approval from its board to invest Rs 550 crore in electric vehicle startup Ather Energy through a rights issue. This fresh investment comes as Ather Energy is closing a pre-IPO funding round to prepare for its planned public listing in 2024.
A rights issue is a way for companies to raise capital from existing shareholders by giving them the ‘right’ to purchase additional shares at a discounted price.
In a rights issue, existing shareholders are offered the right to buy additional shares in proportion to their existing shareholding at a predetermined price, usually at a discount to the current market price. This allows shareholders to increase their stake in the company and allows the company to raise capital without going to the open market.
Founded in 2013 by Tarun Mehta and Swapnil Jain, Ather Energy manufactures two electric scooters – the Ather 450X and the Ather 450 Plus. The company has manufacturing facilities in Hosur, Tamil Nadu and recently opened a second plant in the same district. With this new investment, Ather aims to scale up its annual production capacity from 4.2 lakh units currently to nearly 15 lakh units.
Ather Energy is planning to go public through an initial public offering (IPO) by 2024, as per industry sources. The Bengaluru-based startup recently raised $50 million in October 2022 from investors like Caladium Investment and Herald Square Ventures. During this round, Ather was valued at $700 million. With the upcoming funding round, Ather is expected to gain unicorn status.
In the month of August, Ather Energy reported sales of 6,835 units, marking a 2% increase over the previous month July. The company has set a target to double its market share to 30-40% over the next few years, especially with the launch of its more affordable Ather 450S scooter.
World largest two wheeler Manufacturer – Hero MotoCorp
Hero MotoCorp, the world’s largest two-wheeler manufacturer, already holds a 33.1% stake in Ather Energy. With this new rights issue, Hero aims to further increase its shareholding in the EV startup. However, Ather’s valuation in this round is yet to be finalized.
The fresh investment comes as Hero MotoCorp looks to expand its electric vehicle portfolio, after launching its first EV model last year. The Indian government’s push for electrification of two-wheelers also makes this a strategic investment for Hero.
Ather Energy reported revenues of $218.3 million in financial year ending March this year. India’s two-wheeler segment is expected to lead the country’s electrification drive, before four-wheelers. The government aims for electric vehicles to make up 30% of all vehicle sales in India by 2030.
The rights issue by Ather Energy and the proposed investment by Hero MotoCorp comes just months after the startup faced some challenges due to the ministry reducing subsidies for two-wheelers. This impacted Ather’s growth plans temporarily.
With key Indian two-wheeler players like Hero MotoCorp, Bajaj Auto and TVS Motors lining up investments in electric vehicle startups, India’s two-wheeler segment is prepping for an electric makeover in the coming decade.
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