Hero MotoCorp, the world’s top two-wheeler maker, has announced its plans to invest up to $66.5 million in Ather Energy, a promising electric vehicle startup in India. This investment comes as a boost for Ather Energy, which has already seen significant investment from other notable investors such as Tiger Global, Sachin Bansal, Binny Bansal, and India’s quasi-sovereign fund NIIF. Ather Energy was valued at $739 million in a round last year and was on track to hit $1 billion in revenue by December 2021. However, a recent policy change by the Ministry of Heavy Industries regarding subsidies for two-wheelers has posed a challenge for the company. Despite this setback, Hero MotoCorp’s investment signals confidence in the future prospects of Ather Energy.
Details of the Investment
Hero MotoCorp’s board of directors has approved a fresh investment of up to $66.5 million in the rights issue of Ather Energy. As of now, Hero MotoCorp already owns a 33.1% stake in Ather Energy. The rights issue investment allows Hero MotoCorp to increase its stake in the company further. This shows Hero MotoCorp’s commitment to supporting the growth and development of Ather Energy in the long term.
Previous Investments in Ather Energy
Before Hero MotoCorp’s new investment, Ather Energy had successfully raised $336 million from various investors over the years. Notable investors include Tiger Global, Flipkart founders Sachin Bansal and Binny Bansal, and India’s quasi-sovereign fund NIIF. These investments have played a crucial role in fueling Ather Energy’s growth and development, with the company achieving a valuation of $739 million in its previous funding round.
Effect of Policy Change on Ather Energy
Ather Energy, like many other electric vehicle companies in India, has been a significant beneficiary of state and federal subsidies. However, a recent policy change by the Ministry of Heavy Industries has reduced the subsidy offered for two-wheelers. This policy change came as a blow to Ather Energy, which had been in talks to close a fundraising round of about $250 million at a valuation of over $1 billion. While the exact impact of the policy change on Ather Energy’s growth and valuation is yet to be determined, it has undoubtedly created uncertainty and challenges for the company. Hero MotoCorp’s increased investment comes at a critical time to support Ather Energy in navigating these challenges.
Valuation of Ather Energy in the Rights Issue
The valuation of Ather Energy in the rights issue has not been determined yet. However, Hero MotoCorp’s increased stake in the company indicates its belief in the potential of Ather Energy. The rights issue investment is expected to have a positive impact on Ather Energy’s future financing opportunities as well, as it demonstrates a vote of confidence from a prominent player in the industry.
Financial Performance of Ather Energy
According to Hero MotoCorp, Ather Energy had a turnover of $218.3 million in the previous financial year, which ended in March. This demonstrates the company’s strong financial performance and growth trajectory. With the continued support of investors like Hero MotoCorp, Ather Energy aims to further strengthen its financial position and sustain its growth in the electric vehicle market.
Growing Demand for Electric Two-wheelers in India
The demand for electric two-wheelers in India has been on the rise, driven by various factors. Firstly, the cost of battery-powered cars remains high, making electric two-wheelers a more affordable option for many consumers. Additionally, India has been facing significant air pollution issues, and transitioning a large portion of the country’s total vehicles, which are primarily two-wheelers, to greener alternatives can help address this problem. According to consultancy firm Arthur D. Little, electric vehicles are projected to constitute approximately 30% of all vehicle sales in India by 2030. This presents a significant opportunity for companies like Ather Energy, which specialize in electric two-wheelers.
Hero MotoCorp’s Electric Vehicle Portfolio
Hero MotoCorp, as the world’s largest manufacturer of motorcycles and scooters, has been actively expanding its electric vehicle portfolio. The company launched its first electric vehicle last year, signaling its commitment to embracing the transition to electric mobility. By increasing its stake in Ather Energy, Hero MotoCorp is further strengthening its position in the electric vehicle market and tapping into the expertise and success of Ather Energy.
Conclusion
Hero MotoCorp’s decision to increase its stake in Ather Energy with a $66.5 million investment is a significant development for both companies. It highlights Hero MotoCorp’s confidence in Ather Energy’s growth potential and their commitment to the electric vehicle market. Despite the challenges posed by recent policy changes, Ather Energy continues to be a key player in the Indian electric two-wheeler market. With the support of Hero MotoCorp and other investors, Ather Energy can navigate these challenges, strengthen its financial position, and continue its journey towards becoming a major player in the electric vehicle industry. The investment also strengthens Hero MotoCorp’s position in the electric vehicle market and aligns with its strategy of expanding its electric vehicle portfolio. Overall, this investment marks a positive milestone for both Hero MotoCorp and Ather Energy, with implications for their future growth and success in the electric vehicle sector.
