How IIT Madras Turned 29 Lakh Bet into 50 Crore Ather Energy Windfall

Not many will celebrate as quietly yet as triumphantly as IIT Madras when Ather Energy hits the stock market this week. Through its investment arms,  the IIT Madras Incubation Cell and the IITM Rural Technology and Business Incubator,  the institute transformed an early investment of just INR 15–29 lakh into a stake now worth about INR 50 crore. That’s a return of nearly 172x to 333x over 11 years, a number that would make the most seasoned venture capitalists envious.

A Deep-Rooted Culture of Innovation

The early support of Ather Energy is not an isolated instance for IIT Madras. With a portfolio of 351 deep tech startups pegged at around INR 45,000 crores by the end of 2023, IITMIC has established itself as a player to watch in India's entrepreneurial scene. More interestingly, funded by IITMIC, all of these startups have a survival rate of about 80%, that is, when you consider the industry average for startups, which is around 4% to 6%.

Ather Energy's public listing is set to benefit more than just IIT Madras. Tiger Global, which invested in 2015, stands to earn 8.3x returns through its Internet Fund Pte by divesting about four lakh shares. Other backers, Singapore's GIC and India's National Investment and Infrastructure Fund (NIIF), are looking at returns of 1.6x and 1.7x, respectively. Overall, this is a good outcome for Ather's investors, and it speaks well of their confidence in both Ather and the Indian electric vehicle (EV) sector.

EV Sector Faces New Challenges

While investors are elated over the recent gains, it is prudent to keep a level head and focus on the fundamentals of the EV industry and the sizable challenges it faces, some of which we have touched on before. The price of lithium and cobalt, for instance, can only go up if the domestic lithium and cobalt mining business is as environmentally unfriendly as the same business abroad. EV batteries need these minerals, the prices of which are quite unstable. Also, domestic supply chains for EV mineral and battery production are underbuilt, meaning OEMs must rely more on an EV supply chain from China, which is even more worrisome since many Chinese manufacturers have a serious problem with enforcing labor rights and protecting the environment.

Despite the increasing popularity of EV scooters, this mode of transport still battles some unforgiving issues. A major problem is that of charging infrastructure. Public charging stations are still few and far between, especially beyond urban centers, and that makes anything other than a short, local trip a challenge. Another challenge is high up-front expenditure relative to conventional petrol two-wheelers, despite lower long-term running costs. Consumers are often reticent to put down money without clear assurances of cost-benefit payback. Additionally, some low-cost EV models of sub-optimum quality and reliability are affecting the level of public trust.