New Delhi: With Greaves Electric Mobility filing a draft red herring prospectus (DRHP) for its INR 1000 crore maiden public issue, the spotlight is back on Indian electric vehicle (EV) OEMs looking for ways to generate funds. For the country’s EV industry, working capital needs have been growing but the PE/VC route appears to have dried up, at least for now, as industry insiders point towards growing apathy of investors in a nascent business. “Capital commitment in the green ecosystem by the PE/VC sector is limited, it is only happening for large capex ecosystems. The risk appetite money for the EV needs is limited at present. So accessing the capital markets remains almost the only way for EV OEMs to get the necessary funds to expand manufacturing, meet working capital needs and fund research in a technology intensive sector. For most players, promoters are unwilling to fund the losses that the EV business continues to generate,” said a prominent EV industry player, requesting anonymity. Greaves Electric is following in the footsteps of market leader Ola Electric, which had completed a successful public issue last year. Also, Ather Energy, currently at the fourth position in the electric two wheeler (e2w) pecking order, is already in the queue for an IPO, which is expected in the current quarter.
But while Ola and Ather have a strong grip on the highly competitive e2w market, Greaves Electric is a rather small cog in the e2w ecosystem at present, with market share falling drastically over the last two years. Ola controls nearly a third of the domestic e2w market while Ather closed 2024 with over 11% share of the market. As per the DRHP, while Greaves Electric held 12% share in 2022-23 but it had shrunk to just about 3.2% in the six months till September of the current fiscal.
In the DRHP, however, the company claims it has over 5% market share in certain states and union territories such as Tamil Nadu, Bihar, Jharkhand, Uttarakhand and Chandigarh in the six month period ending on September 30, 2024. Also it says there were 309 e2w dealers by September this year, of which an overwhelming 91% in non-metro cities.
The company has cited a report by ratings agency CRISIL to say that it has been in the electric vehicle market for 16 years, with a bouquet of vehicles in two and three wheeler segments, catering to B2B as well as B2C customers. And that it is also considering an entry into the mass market electric motorcycle segment.
At present, the company is present in high-speed, city-speed and low-speed electric scooters through the Ampere brand; e-rickshaws and three wheelers (ICE as well as electric). As per the DRHP, 62 paise of every rupee it earned as revenue in the six months ended September 30, 2024 was from the sale of electric two wheelers, while the remaining came from sale of ICE and electric three wheelers.
It manufactures e2ws at Ranipet in Tamil Nadu where the installed capacity is 4.8 lakh units annually but not even 10% of this is being utilised as of now. At Greater Noida, the capacity is 21,510 units of which nearly 37% is being utilised while in Toopran, utilisation is nearly half or 46.56%. Greaves Electric manufactures three wheelers at the Greater Noida and Toopran facilities.
E2w market upheaval:
Greaves Electric has seen its grip of the e2w market loosen over the last two years, as have many other erstwhile leaders. In fact, legacy two wheeler OEMs TVS Motor Company and Bajaj Auto have expanded at a furious pace with their distribution strength derived from the ICE two wheeler business and also by rapid product portfolio expansion. Another factor which has altered the shape and contours of the e2w market in the last two years has been the mess within the government’s purchase subsidy scheme architecture, with electric-first OEMs (including Greaves Electric) getting caught up in the controversy alongside a drastic reduction in subsidy payouts and subsequent demand notices to many e2w OEMs for returning disputed subsidy amounts to the exchequer.
The upshot of this upheaval in the market has been the meteoric rise of legacy OEMs and the sidelining of the electric-first OEMs, including Greaves Electric.
Subsidy refunded by Greaves Electric
The company has said in the DRHP that in 2023, the Ministry of Heavy Industries (the administrative ministry for providing purchase subsidies for e2w) conducted an enquiry with respect to compliance of the “Faster Adoption and Manufacturing of Electric Vehicles in India Phase II” (“FAME II Scheme”).
“We received a notice from the MHI dated May 25, 2023, proposing to (i) recover the incentives claimed by us since the inception of the Fame II Scheme, along with interest thereon, (ii) cancel all pending claims for payment with the MHI; and (iii) deregister us from the FAME II Scheme. We thereafter refunded an amount of INR 1,399.76 million (comprising INR 1,249.10 million of subsidy and INR 150.66 million as interest thereon) without admitting any allegations or contentions. On August 2, 2024, we had submitted an undertaking to MHI to not seek disbursement of subsidy claims applied for during the period from Fiscal 2020 to Fiscal 2023. Accordingly, we have written off INR 3,618.00 million during the six months ended September 30, 2024 by utilising the provision made in the books of accounts.”
Offer
The IPO is a mix of fresh issue of equity shares up to INR 1,000 crore and an Offer for Sale (OFS) of up to 18.9 crore equity shares by the selling shareholders. Within the OFS segment, Greaves Cotton, which is the promoter shareholder, plans to sell a little over five crore equity shares. Abdul Latif Jameel Green Mobility Solutions DMCC, which is the investor selling shareholder, will sell 13.8 crore shares. The proceeds of the public issue will be used for investing in product and technology development and enhancing capabilities at its Technology Centre in Bengaluru. Also, the monies will be used to build in-house battery assembly capabilities, expansion of manufacturing capacities at subsidiary companies and for inorganic growth through acquisitions.
