EV makers aim to go public, as private investors turn cautious

A successful initial public offering (IPO) by Bhavish Aggarwal-led e-two-wheeler maker Ola Electric, the largest in terms of sales in India currently, will likely trigger a spate of initial share sales by big electric vehicle original equipment manufacturers (OEMs), including by its Bengaluru-based rival Ather Energy, which is already recruiting merchant bankers.

Mint has learnt that as many as half a dozen of them, including Ola Electric and Ather Energy, could be in the offing in the next two to three years, as private capital, which helped these companies grow, becomes harder to access amid a bunch of adverse policy events and a stagnating market for electric two-wheelers over the last few months.

EV arms of established players such as Tata Motors and Mahindra & Mahindra also need to raise large amounts of capital to scale in the mass market. These companies have brought in private equity investors to their cap table, and an IPO would give them an exit and help unlock value.

“We have established a separate company for our electric business. As the EV business gains scale over the next few years, we will explore all options to create value for our shareholders, which may include an IPO. There are no firm plans at this point," a Mahindra & Mahindra spokesperson told Mint. Mahindra could look to hive off and list its last-mile mobility business, which is responsible for manufacturing e-three-wheelers, an industry executive said on condition of anonymity.

Tata Motors, which recently announced a plan to demerge its commercial vehicle (CV) and passenger vehicle (PV) business, said there is no immediate plan to separately list its EV business. However, industry watchers believe Tata separately listing its PV business is an eventual step towards unlocking further value in the EV business and laying the groundwork for raising capital for further growth.

Following a FAME-II subsidy fiasco last year that forced several leading e-two-wheeler makers to refund the cost of on-board chargers to customers, followed by a sharp reduction in the amount of the subsidy itself, scepticism in the private markets has grown. TVS Motor Co. pulled its EV fundraise deal off the market, and prominent EV OEMs Ather and Ola had to bank on internal fundraise. Ather may be kicking off a pre-IPO round in the next couple of months.

“Leading EV players have achieved critical mass when it comes to scale and now have their sights set on profitable unit economics. The next phase is going to be that of mass EV adoption which will drive exponential growth for these companies. Private capital has played an essential role in scaling EV companies so far, but as macro trends align favourably for large-scale electrification, we will see many of them going in for IPOs," Koushik Bhattacharyya, managing director and head, industrials, Avendus Capital, told Mint.

"EV companies will show a strong interest in public markets based on two long-term growth drivers – global energy transition and premiumization in India. We expect to see at least six-eight large EV IPOs in the next 24 months, as listing is an attractive option for EV players, providing them much better access to capital in a phase of exponential growth," he added.

Ather Energy is scouting for locations for a new factory for its electric two-wheelers, and an IPO would be crucial for these plans. “With the tailwinds we are seeing for the Ather 450 portfolio, and our entry into the family segment with Ather Rizta, we are looking at a hockey stick growth. To address this, we are adding about 1 million units capacity in our operations," Ravneet Singh Phokela, chief business officer, Ather Energy, told Mint.

However, hitting the D-Street may come with a bunch of challenges for e-two-wheeler makers. Ola Electric, for instance, is conducting yet another roadshow in Singapore, as investors turn wary of the high valuation the company is seeking. According to two sources in the know, domestic and foreign investors are skeptical about growth prospects of the company amid the high discounts it offers and as the market for EVs itself grows slower than estimated. Ola Electric, which sought an IPO valuation as high as $8 billion, the sources cited above added, is struggling to build consensus for a $5.5 billion - $6 billion valuation at which it raised its last round of funding from existing backer Temasek.

Not only OEMs, but ecosystem participants such as manufacturers of chargers and batteries also are increasingly keen on tapping the public markets. On 5 March, Exicom Group, a leading manufacturer of electric vehicle chargers, listed on the stock exchanges at a premium of 87% to its issue price of ₹142 per share.

“The whole electric mobility space is a very vibrant ecosystem, not just for charger makers, but even for components inside the EVs, battery, software, and the rest. There is a lot of interest from new startup companies or the incumbents, ancillaries makers etc to enter the space and participate in this sector," Anant Nahata, chief executive officer, Exicom Group, told Mint.