Electric two-wheeler manufacturer Ather Energy has reported a slowdown in customer acquisition, on the back of a sharp reduction in its advertising and promotional spending.
As Ather prepares for its upcoming initial public offering (IPO), its draft red herring prospectus (DRHP) reveals that marketing cuts have impacted customer growth, which slowed from 270% in FY23 to just 34% in FY24. In absolute numbers, Ather’s customer base stood at 11,400 in FY24.
In FY23, Ather’s aggressive marketing strategy, including Rs 226 crore spent on customer acquisition, yielded strong results. However, in FY24, the company reduced its spending by more than half to Rs 107 crore, leading to a marked slowdown in new customer additions.
Ather acknowledged in its DRHP that its success heavily depends on its ability to attract customers to its electric two-wheelers, accessories, and charging services, with marketing being a key driver of growth.
"Our success depends on our ability to attract customers to purchase our E2Ws, accessories, Atherstack, and charging services," the company noted. Ather also highlighted the risks associated with reduced marketing investments, stating, “There can be no assurance that such efforts will yield their expected benefits.”
Ather Energy's IPO plans include a fresh issue of shares worth Rs 3,100 crore, with funds aimed at expanding its manufacturing capabilities in Maharashtra and further research and development. Additionally, existing investors and promoters, including Tarun Mehta, Swapnil Jain, and corporate entities like Caladium Investment Pte Ltd and NIIF II, will offload up to 2.2 crore shares through an offer for sale.
Also Read | Indian electric two wheeler-maker Ather Energy files for IPO, including Rs 3,100 crore fresh issue
The company’s advertising strategy has gone through two distinct phases. The first phase focused on community outreach, beta test drives, and influencer marketing. The second phase, which ramped up in FY22 and FY23, included high-profile sports sponsorships and influencer campaigns. Despite this push, advertising and promotion spending dropped to 6% of revenue in FY24, down from 13% in the previous two years.
Apart from exit for certain investors, Ather Energy’s IPO fund raise is to solidify its market position amid increasing competition in the electric vehicle space. The funds raised from the IPO will be allocated to capital expenditures for establishing a new electric two-wheeler manufacturing facility in Maharashtra, India, and will also support ongoing research and development efforts. According to the prospectus, the company is to earmark Rs 300 crore (just check once more, remember seeing this) for marketing spends.
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