Ather achieves profitability milestone, supply ramp-up to pave the road ahead

Although commodity price pressures have sustained through FY27 so far, Ather turned Ebitda-profitable with a 0.8% margin versus a negative 2.7% in Q1. The Q2 Ebitda margin including other income stands at 5.1%, compared with 0.8% in Q1. The turnaround has been led by operating leverage even as supply continued to cap growth. Against a 108% year-on-year growth in demand, as measured by pre-orders, registrations increased only 60% to 92,600 units.

Production grew 45% to 98,400 units. The management acknowledged that about 18,000-20,000 units per month of retail demand remains unrealized. Towards this, capacity expansion is underway in full swing. The enhancement of its Hosur facility is expected to be completed in Q3, while Phase 1 of the AURIC plant in Maharashtra is slated for Q4. Together, they are expected to more than double capacity from 420,000 units to 920,000 units by FY27-end.

The long-term capacity target stands at 1.64 million units. Operating leverage should dial up with capacity expansion, while the management also pushes the pedal on dealer network expansion from Q4. But the impact on margins will be less straightforward. The AURIC ramp-up is expected to add to costs from Q4. The management expects the net impact to be positive as the new launch Konarc offers structurally better unit economics than the Rizta model—6-7% higher gross margins over the long term, according to the management.

It will have to be seen whether this sustains with entry variants (SR1) expected to be launched in Q4. The management has started with mid-variants (SR2 and SR3) keeping in mind production availability and margin considerations. Konarc’s early traction in the north is encouraging and bodes well for expansion of Ather’s addressable market. Better pricing and product mix have helped support margins over the first two quarters of FY27.

Commodity inflation eroded 940 basis points (bps) from the gross margin. On the other hand, structural improvements including price hikes and cost-reduction initiatives added 530 bps and growth in high-range models added another 270 bps to the gross margin. Effectively, the gross margin (including other income) came in at 24%, down 140 bps from Q4FY26 levels. The company's weighted average ex-showroom price rose to ₹1.64 lakh in Q2 from ₹1.50 lakh in Q4FY26, while AtherStack Pro's 94% attach rate helped sustain high-margin, non-vehicle revenue share at 15%.

While copper prices have spiked on AI-related demand and plastic has turned expensive amid the West Asia war, the management expects commodities to remain broadly flat in Q3. Thus, no price hikes are planned in Q3. But production ramp-up and dealer availability must keep pace with demand to contain the market-share slippage from 17.2% to 15.1% over the past year. Competition and commodity volatility also remain risks.

Nomura Research’s estimates place Ather at 4x EV/sales on FY29 numbers, which they said is “very attractive considering its much higher growth potential versus peers.”