Ather Energy Has A Margin Lever Against Waning Subsidy, In Quest For Profitability

Ather Energy Ltd. has identified a margin lever in its quest for profitability, even as the wider electric two-wheeler industry preps for life without subsidy.

In the nine months through Dec. 31, the IPO-bound EV maker drew 6% of its revenue from the software business at an Ebitda margin of 53-56%, its red-herring prospectus showed. That helped prop up adjusted gross margin to 19% from 7% in the year-ago period, even as hardware subsidy waned by 77%.

Clearly, the ‘Ather Propack' isn't simply a value addition for the customer. 

According to Ather Energy, 86-89% of its customers opt for the Propack, which gives them access to software features such as traction control, AutoHold (hill-hold assist), over-the-air updates and anti-theft alerts. Priced at Rs 13,000-20,000, the Ather Propack funnels directly into the revenue from operations, as its an “opt-in” with the vehicle at purchase.

Essentially, the Ather Propack is immune to an evolving hardware subsidy regime.

“The sale of Atherstack software serves as another revenue stream and offers significant opportunities at high gross margins,” the RHP stated. “With EBITDA margins north of 50%, every additional rupee of software revenue contributes more than two times the profit of a rupee, turning software into a strategic hedge against hardware headwinds.”